KINEPOLIS...Word from the Chairman and CEOs Ladies and Gentlemen, Dear shareholder, customer and employee, 2016 was an exceptional year of expansion for Kinepolis, with the opening

www.kinepolis.com/corporate Registered offi ce: Kinepolis Group NVEeuwfeestlaan 201020 Brussels, Belgium

Annual report

KINEPO

LIS AN

NU

AL REPO

RT 2016

KEY FIGURES AND RATIOS2 Key fi gures3 Ratios

ANNUAL SUMMARY5 Word from the Chairman

and CEOs8 Kinepolis Group in brief10 Organization and strategy

- Our mission and strategy- The Kinepolis concept- Our organization- Our people- Green Star, our

sustainability project- Expansion- General market

information29 2016 at a glance

Kinepolis Jaarbeurs (NL) Our clients

Contents

©Ruud Vonk

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IJM

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KINEPOLIS GROUP ANNUAL REPORT 2016CONTENTS

MANAGEMENT REPORT31 Discussion of the results36 Corporate governance

statement54 Other information55 Declaration with regard to

the information contained in this annual report

SHARE INFORMATION 56 The Kinepolis Group share

FINANCIAL REPORT62 Consolidated financial

statements68 Notes to the consolidated

financial statements122 Statutory auditor’s report124 Condensed financial

statements of Kinepolis Group NV

126 Glossary127 Financial calendar

2017-2018

Our peopleKinepolis Dordrecht (NL) Kinepolis Enschede (NL)

KINEPOLIS GROUP ANNUAL REPORT 2016 1CONTENTS

CONSOLIDATED INCOME STATEMENT (IN € ’000) 2012 2013 2014 2015 2016

Revenue 254 505 245 980 262 619 301 571 324 938

EBITDA 72 252 75 006 71 303 88 739 91 650

REBITDA 74 001 74 634 74 264 90 958 94 574

Gross profit 82 221 82 111 81 843 99 578 100 209

Operating profit 51 673 55 069 50 665 65 245 63 207

Net finance expense -5 859 -5 998 -4 295 -7 754 -7 619

Profit before tax 45 814 49 071 46 370 57 491 55 588

Profit 35 704 37 541 35 167 32 255 47 646

Current profit 37 405 37 395 35 589 43 207 40 413

ANNUAL GROWTH RATES 2012 2013 2014 2015 2016

Revenue 0.3% -3.3% 6.8% 14.8% 7.7%

EBITDA -3.1% 3.8% -4.9% 24.5% 3.3%

REBITDA 3.2% 0.9% -0.5% 22.5% 4.0%

Gross profit 3.2% -0.1% -0.3% 21.7% 0.6%

Operating profit -3.1% 6.6% -8.0% 28.8% -3.1%

Profit -2.1% 5.1% -6.3% -8.3% 47.7%

Current profit 6.3% 0.0% -4.8% 21.4% -6.5%

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (IN ’000 €) 2012 2013 2014 2015 2016

Non-current assets 261 868 255 239 302 068 392 075 424 122

Current assets 65 703 55 072 44 996 98 624 79 324

TOTAL ASSETS 327 571 310 311 347 064 490 699 503 446

Equity 108 668 104 657 104 732 123 033 149 898

Provisions and deferred tax liabilities 21 466 20 525 18 352 27 029 25 531

Non-current loans and borrowings 81 709 87 917 91 471 214 000 207 278

Current loans and borrowings and bank overdrafts 37 731 19 332 44 095 8 714 6 996

Trade and other payables 72 949 70 487 79 651 97 090 100 160

Other 5 048 7 393 8 763 20 833 13 582

TOTAL EQUITY AND LIABILITIES 327 571 310 311 347 064 490 699 503 446

NUMBER OF COMPLEXES (1) BELGIUM FRANCE SPAIN NETHERLANDS LUXEMBOURG

OTHER (POLAND&

SWITZERLAND)TOTAL

2016 12 11 6 15 3 2 49

VISITORS (MILLIONS) (2) BELGIUM FRANCE SPAIN NETHERLANDS LUXEMBOURG SWITZERLAND TOTAL

2015 9.2 6.4 4.4 1.7 0.3 0.1 22.1

2016 8.4 7.0 4.4 2.8 1.1 0.1 23.8

2016 vs. 2015 -8.2% 9.3% 1.0% 56.9% 309.3% -10.0% 7.5%

KEY FIGURES

(1) Including Cinema City Poznań (Poland), operated by Cineworld and UGC Toison d’Or (Belgium) operated by UGC.(2) Excluding Cinema City Poznan (Poland) and UGC Toison d’Or (Belgium).

Key figures and ratios

01 / KEY FIGURES AND RATIOS2 KINEPOLIS GROUP ANNUAL REPORT 2016

21.8%22.9%

20.9%

21.5%

rebitda/opbrengsten 2016

Roce 2016

15.0

20.0

25.0

22.5

17.5

2012 2013 2014 2015 2016

Netto financiële schuld / eigen vermogen 2016

0.6

0.9

1.2

1.5

17.9%

29.1%30.3%

28.3%

30.2%

25.0

30.0

35.0

32.5

27.5

2012 2013 2014 2015 2016

29.1%

0.83

0.84

1.13

1.32

2012 2013 2014 2015 2016

1.13

25

30

35

0,6

0,9

1,2

1,5

15

20

25

21.8%22.9%

20.9%

21.5%


Roce 2016

15.0

20.0

25.0

22.5

17.5

2012 2013 2014 2015 2016


0.6

0.9

1.2

1.5

17.9%

29.1%30.3%

28.3%

30.2%

25.0

30.0

35.0

32.5

27.5

2012 2013 2014 2015 2016

29.1%

0.83

0.84

1.13

1.32

2012 2013 2014 2015 2016

1.13

25

30

35

0,6

0,9

1,2

1,5

15

20

25

21.8%22.9%

20.9%

21.5%


Roce 2016

15.0

20.0

25.0

22.5

17.5

2012 2013 2014 2015 2016


0.6

0.9

1.2

1.5

17.9%

29.1%30.3%

28.3%

30.2%

25.0

30.0

35.0

32.5

27.5

2012 2013 2014 2015 2016

29.1%

0.83

0.84

1.13

1.32

2012 2013 2014 2015 2016

1.13

25

30

35

0,6

0,9

1,2

1,5

15

20

25

DATA PER SHARE (3) 2012 2013 2014 2015 2016

Revenue 8.77 9.06 9.99 11.26 11.94

EBITDA 2.49 2.76 2.71 3.31 3.37

REBITDA 2.55 2.75 2.82 3.40 3.48

Profit 1.23 1.38 1.34 1.20 1.75

Current profit 1.29 1.38 1.35 1.61 1.48

Equity share of the Group 3.75 3.85 3.89 4.59 5.51

Gross dividend (4) (5) 0.47 0.64 0.65 0.79 0.87

Pay-out ratio 35% 45% 50% 50% 50%

RATIOS

(3) Calculation based on the weighted average number of shares for the relevant period, multiplied by five for the period 2011 through 2013, to take account of the share split in 2014 and enable a comparison of the figures.

(4) Calculation based on the number of dividend eligible shares. For the period 2011 up to and including 2013 divided by 5, bearing in mind the splitting of each share in five shares on 1 July 2014 for the sake of comparison.

(5) An additional exceptional dividend of € 0.20 per share was paid out for the fiscal year 2014

ROCENET FINANCIAL DEBT / EQUITY

REBITDA / REVENUE

PROFITABILITY RATIOS 2012 2013 2014 2015 2016

EBITDA / Revenue 28.4% 30.5% 27.2% 29.4% 28.2%

REBITDA / Revenue 29.1% 30.3% 28.3% 30.2% 29.1%

Gross profit / Revenue 32.3% 33.4% 31.2% 33.0% 30.8%

Operating profit / Revenue 20.3% 22.4% 19.3% 21.6% 19.5%

Profit / Revenue 14.0% 15.3% 13.4% 10.7% 14.7%

FINANCIAL STRUCTURE RATIOS 2012 2013 2014 2015 2016

Net financial debt 90 200 88 141 118 645 162 008 169 751

Net financial debt / EBITDA 1.25 1.18 1.66 1.83 1.85

Net financial debt / REBITDA 1.22 1.18 1.60 1.78 1.79

Net financial debt / Equity 0.83 0.84 1.13 1.32 1.13

Equity / Total equity and liabilities 33.2% 33.7% 30.2% 25.1% 29.8%

Current Ratio 0.61 0.62 0.36 0.85 0.71

ROCE 21.8% 22.9% 20.9% 21.5% 17.9%

01 / KEY FIGURES AND RATIOS 3KINEPOLIS GROUP ANNUAL REPORT 2016

Kinepolis Breda (NL)

Annual summary

4 KINEPOLIS GROUP ANNUAL REPORT 201602 / ANNUAL SUMMARY

Word from the Chairman and CEOs Ladies and Gentlemen, Dear shareholder, customer and employee,

2016 was an exceptional year of expansion for Kinepolis, with the opening of five new build complexes in the Netherlands, Spain and France, and the successful integration of acquired complexes. In spite of the less strong film offer, the European football championships and fewer holidays in 2016, the Group posted solid results with a rise in REBITDA per visitor in virtually all countries.

The number of visitors rose from 7.5% to 23.8 million, primarily due to acquisitions in 2015 that were included in the figures for the whole year for the first time, the acquisition of a cinema in Rouen (France) in January 2016 and newly opened cinema complexes in the Netherlands (Dordrecht, Breda, Utrecht), Spain (Granada) and France (Fenouillet). The film offer in 2016 was unable to match an exceptional 2015, which included ‘Minions’, ‘Jurassic World’ and ‘Star Wars: The Force Awakens’, and local content also disap-pointed in most countries.

Total revenue rose by 7.7% to € 324.9 million, out pacing the rise in visitor numbers, due to an increase in revenue in all business lines except Brightfish. Sales per visitor increased again in virtually all countries, in spite of a negative impact due to the changed country mix, with a lower share for Belgium.

Current EBITDA rose less strongly, by 4.0% to € 94.6 million, primarily due to the changed country mix, the ongoing process of integrating acquired cinemas and the acquisition of Utopolis with partly leased complexes. On the other hand, REBITDA per visitor increased in all countries except France.

5KINEPOLIS GROUP ANNUAL REPORT 2016 02 / ANNUAL SUMMARY

Current profit in the year under review was € 40.4 million, a fall of 6.5% compared with 2015, due to higher depreciations as a consequence of the expansion and a higher effective tax rate. However, total profit increased by 47.7% to € 47.6 million, due to the one-off provision in 2015 in response to the decision of the European Commission on the Belgian Excess Profit Ruling (EPR) and the revenue from the sale of Utopolis Belgium in 2016.

The Board of Directors will propose to the General Meeting of Wednesday 10 May 2017 a pay-out ratio of 50% of net profit. With due consideration for the number of shares entitled to dividend on 17 February 2017, this means a gross dividend per share of € 0.87. This is a rise of 10.1% compared with 2015.

Expansion remains high on the agenda. We now have 49 complexes and construction recently began for a new cinema complex in ’s-Hertogen-bosch (the Netherlands), which will open in 2018.

We will also open the first Kinepolis complex in the Île-de-France region in 2018, at Brétigny-sur-Orge (France), 35 kilometers south of Paris.

We have been working on our three strategic pillars for almost ten years and they continue to pay off. We continue to invest in innovation and a peerless customer experience. The Cosy Seats were installed in even more cinemas in 2016, virtually all new build cinemas were exclusively equipped with laser projectors and the implementation of our new cinema ERP system (the software used for customer interactions) is being finalized. We also continue to invest in digital marketing. The new Kinepolis app for Android and iOS users, for example, enables us to deepen the interaction with our visitors and provide a personalized offer.

Kinepolis launched the Innovation Lab in early 2016 to encourage even more innovation and entrepre-neurship across departments within the organiza-tion. In the first year more than 300 ideas were submitted by all parts of the organization from various countries. The first finalized project coming from the Innovation Lab is the Sushicque concept, a sushi bar operated in-house, while numerous other projects are currently being fleshed out.

Artist impression of Kinepolis ’s-Hertogenbosch (NL) and Brétigny-sur-Orge (FR)

02 / ANNUAL SUMMARY6 KINEPOLIS GROUP ANNUAL REPORT 201602 / ANNUAL SUMMARY

Eddy Duquenne CEO Kinepolis Group

Joost Bert CEO Kinepolis Group

Philip GhekiereChairman of the Board of Directors

Lastly, in 2017 we will continue to invest in attract-ing, developing and retaining talented people. Our human capital is the key to the success of Kinepolis and the engine of expansion for the Group. Investing in people remains one of our absolute priorities.

The 2017 line-up looks very promising, including ‘Fifty Shades Darker’, ‘Kong: Skull Island’, ‘The Fate of the Furious’, ‘Cars 3’ and ‘Dunkirk’. For the coming year our recipe for success remains a high-quality film program, together

with further expansion and continued investment in creating a unique customer experience and a varied offering.

Kinepolis would not be able to achieve its ambitious goals without the commitment and trust of its employees, movie-lovers, partners, investors and other stakeholders. We would like to thank each and every one of them and assure them that we do everything we can to earn that trust every single day.

From the left: Eddy Duquenne, CEO, Philip Ghekiere, Chairman of the Board of Directors and Joost Bert, CEO

02 / ANNUAL SUMMARY 7KINEPOLIS GROUP ANNUAL REPORT 2016 02 / ANNUAL SUMMARY

23.8 mio

49 (2)

528123 675

complexes

theatres

seats

number of visitors in 2016


2016 2015

22.1 mio46

(2)

491117 813

complexes

theatres

seats

2.8 mio1510420 356

1.7 mio148416 308

The NetherlandsAlmereBredaDen HelderDordrechtEmmenEnschede x2Groningen

0.1 mio181 555

0.1 mio SwitzerlandSchaffhausen1

81 555

4.4 mio69928 693

4.4 mio SpainAlicanteMadrid x2Granada x2Valencia

59127 765

1.1 mio3224 843

0.3 mio 3224 927

AntwerpBrugesBrussels x2GhentHasselt

Esch-sur-AlzetteLuxembourg City x2

Braine l'AlleudKortrijkLeuvenLuik x2Oostende

Belgium

Grand Duchy of Luxembourg

8.4 mio-8.2%

+309.3%

+9.3%

+1.0%

+56.9%

-10.0%

9.2 mio1214836 697

1 (4)

18118

Poznań

Poland

7.0 mio1112831 948

6.4 mio FranceLommeLongwyBourgoinFenouilletMulhouse

NancyNîmes x2Rouen Saint-SeverSt-Julien-lès-MetzThionville

1012030 561

12 (3)

14936 280

Braine l’AlleudKortrijkLouvainLiège x2Ostend

+7.5%

(1) On the date of publication belonging to the real estate portfolio, regardless of whether they are used for cinema operations.(2) Including one complex operated by UGC (Toison d’Or, BE) and one operated by Cineworld (Poznan, PL). Number of seats not included in the total. (3) Including one complex operated by UGC. Number of seats not included here. (4) Cinema operated by Cineworld. Number of seats not included here.

HuizenNieuwegeinOssRotterdamUtrecht x2Zoetermeer

Kinepolis Group in briefKinepolis Group was formed in 1997 through the merger of two cinema groups and has been listed since 1998. Kinepolis Group stands for an innovative cinema concept, which serves as a pioneering model within the industry.

On the date of publication of this annual report Kinepolis has 49 cinema complexes throughout Belgium, the Netherlands, France, Spain, Luxembourg, Switzerland and Poland. In addition to its cinema operations, the Group is also active in film distribution, event organization, screen advertising and property management.

Every day, 2 300 employees devote themselves to ensuring that millions of cinema-goers have an unforgettable experience.

8 KINEPOLIS GROUP ANNUAL REPORT 201602 / ANNUAL SUMMARY

23.8 mio

49 (2)

528123 675

complexes

theatres

seats



2016 2015

22.1 mio46

(2)

491117 813

complexes

theatres

seats

2.8 mio1510420 356

1.7 mio148416 308

The NetherlandsAlmereBredaDen HelderDordrechtEmmenEnschede x2Groningen

0.1 mio181 555

0.1 mio SwitzerlandSchaffhausen1

81 555

4.4 mio69928 693

4.4 mio SpainAlicanteMadrid x2Granada x2Valencia

59127 765

1.1 mio3224 843

0.3 mio 3224 927

AntwerpBrugesBrussels x2GhentHasselt

Esch-sur-AlzetteLuxembourg City x2

Braine l'AlleudKortrijkLeuvenLuik x2Oostende

Belgium

Grand Duchy of Luxembourg

8.4 mio-8.2%

+309.3%

+9.3%

+1.0%

+56.9%

-10.0%

9.2 mio1214836 697

1 (4)

18118

Poznań

Poland

7.0 mio1112831 948

6.4 mio FranceLommeLongwyBourgoinFenouilletMulhouse

NancyNîmes x2Rouen Saint-SeverSt-Julien-lès-MetzThionville

1012030 561

12 (3)

14936 280

Braine l’AlleudKortrijkLouvainLiège x2Ostend

+7.5%

(1) On the date of publication belonging to the real estate portfolio, regardless of whether they are used for cinema operations.(2) Including one complex operated by UGC (Toison d’Or, BE) and one operated by Cineworld (Poznan, PL). Number of seats not included in the total. (3) Including one complex operated by UGC. Number of seats not included here. (4) Cinema operated by Cineworld. Number of seats not included here.

HuizenNieuwegeinOssRotterdamUtrecht x2Zoetermeer

Benelux

Planned new complex

Complex in ownerschip and/or operated by Kinepolis

Kinepolis in Europe (1)

9KINEPOLIS GROUP ANNUAL REPORT 2016 02 / ANNUAL SUMMARY

Organization and strategy

Kinepolis wants to offer film and culture lovers a unique experience and pursues a personalized program for various target groups. Kinepolis wants to create sustainable value for customers, employ-ees, shareholders, partners and the community. The three pillars of its strategic model go hand in hand with sustainable enterprise.

KINEPOLIS WANTS TO BE THE BEST MARKETERKinepolis is committed to meeting the needs and wants of the

audience as much as possible through intensive interaction with its visitors and tailored content. Kinepolis is committed to positioning itself as the best marketer by responding to the expectations of various target groups.

KINEPOLIS WANTS TO BE THE BEST CINEMA OPERATORKinepolis is committed to giving visitors unique entertainment and

business experiences in the best possible condi-tions. In doing so, Kinepolis pursues top technical and logistical quality to create a unique cinema experience.

KINEPOLIS WANTS TO BE THE BEST REAL ESTATE MANAGERKinepolis is committed to manag-ing, using and developing its

unique real estate portfolio optimally.

Our mission and strategy

02 / ANNUAL SUMMARY10 KINEPOLIS GROUP ANNUAL REPORT 201602 / ANNUAL SUMMARY

All pillars are focused on creating the ultimate movie experience, a cinema concept that revolves around the total experience of the visitor. Kinepolis’ efforts were rewarded with a Global Achievement in Exhibition Award in 2014 as the world’s best cinema operator.

Successful event formulas, such as ‘Ladies at the Movies’

2014 Global Achievement in Exhibition Award

Attractive coffee cornerState-of-the-art cinema infrastructure

The ultimate movie experience

Kinepolis Breda (NL)

02 / ANNUAL SUMMARY 11KINEPOLIS GROUP ANNUAL REPORT 2016 02 / ANNUAL SUMMARY

CUSTOMER-FOCUSED INNOVATION Kinepolis sets trends and constantly invests in innovation and an optimal customer experience. In recent years this drive to innovate has led to the digitization of the cinema, seat reservation, the latest projection and sound technologies, mobile ticketing, trend-setting events and refreshing marketing approaches.

In addition to innovations to enhance the film experience, Kinepolis also works hard to improve the pre- and post-movie experience, and con-stantly designs new shop and interior concepts (such as the Leonidas Chocolates Café and Sushicque).

Due to their innovative infrastructure Kinepolis cinemas are also ideal B2B venues for conferences, premières and corporate events.

As regards content, a permanent offering of eye-catching events and alternative content, such as concerts, art, opera and ballet, complements the regular movie program.

The Kinepolis concept

NEW MOBILE APPSThe new Kinepolis apps for Android and iOS users were released at the end of January 2017. The apps have a revamped user-friendly design, ensuring a more personalized experience. For the first time, tickets are now delivered directly in the app, through the user’s 'My Kinepolis' account. Select the film and the cinema, pay and receive the ticket: that is now all possible with a few taps in the Kinepolis app.

NEW VISTA ERP SYSTEM In 2016 Kinepolis continued to roll out its new cinema ERP system, known as Vista, in virtually all of its complexes. Vista is the software package behind all important corporate processes, from film descriptions to popcorn sales. The new system offers uniformity and enables the central management of data, which is important in the light of the current and future growth of the Group. Vista will be operational in all Kinepolis complexes from April 2017.

02 / ANNUAL SUMMARY12 KINEPOLIS GROUP ANNUAL REPORT 2016

RELATIONSHIP MARKETINGAs a film expert, Kinepolis is committed to providing the best possible response to the preferences of its visitors. Kinepolis wants to offer the ultimate movie experience, based on a thorough understanding of its customers – making use of an innovative digital relationship marketing system – and a tailored offering. Millions of customers receive film and event recommendations by email based on their personal preferences.

In the future Kinepolis is committed to further invest in the relationship with its customers through mobile and online services.

ACTIVE PROGRAMMINGThe Kinepolis offering is not limited to current international blockbusters. In recent years Kinepolis has made the switch from passive to active programming. In doing so, Kinepolis selects films based on the preferences of its customers, which means they can differ accord-ing to the cinema. Kinepolis’ goal is to offer something to each of its target groups at all times during the year.

Premiere of ‘De Premier’ at Kinepolis Antwerp (BE)

LASER ULTRAWith Laser ULTRA Kinepolis combines the unique image quality of Barco’s best laser projector with the immersive Dolby Atmos sound system. Together, these two technologies give visitors an even more intense film experience, a feeling that they are in the center of the action.

COSY SEATINGThe Cosy Seating concept has been well received by customers and in 2016 Kinepolis installed them in even more cinemas in Belgium (Rocourt, Bruges, Brussels, Braine-l’Alleud), France (Lomme, Thionville, Metz, Nancy, Nîmes) and the Netherlands (Breda). These seats offer even greater comfort and convenience, with extra wide armrests, a handy table for drinks and snacks and a coat hanger. Visitors can choose Cosy Seats for a supplement on the normal ticket price.

OPERA & ART IN THE CINEMA In recent years Kinepolis has developed an impressive alternative program of opera, ballet, theatre and art exhibitions. There are regular screenings in Belgium, France, Spain, Switzerland, the Netherlands and Luxembourg, in association with partners such as the MET, the Royal Opera House and the Bolshoi. Opera is now firmly established, attracting more than 30 000 visitors per year at the Belgian Kinepolis cinemas alone.

Self-service shop with wide range

02 / ANNUAL SUMMARY 13KINEPOLIS GROUP ANNUAL REPORT 2016

The structure of Kinepolis Group is tailored to its geographic markets and is characterized by a flat organization in which decisions can be taken quickly. The organization consists of seven core businesses: Box Office, In-Theatre Sales, Business-to-Business, screen advertising (Brightfish), film distribution (KFD), Real Estate and Digital Cinema Services.

CORE BUSINESSES

BOX OFFICE Box office comprises the sale of cinema tickets. Performance here is highly dependent on a number of external factors, including film content, weather and holiday periods. Kinepolis reaches a wide range of movie lovers and culture vultures by constantly optimizing cinema capacity and seat occupancy with a varied film and cultural offering. With its active programming approach Kinepolis’ goal is to offer something to various target groups at all times during the year. The regular film offering is perma-nently complemented with events (such as ‘Ladies at the Movies’ and ‘Horror Nights’ or ‘Obscure Nights’) and alternative content, such as art, opera and ballet.

IN-THEATRE SALES In-theatre sales (ITS) comprises all activities relating to the sale of beverages and snacks in the cinemas. This business has become more important in recent years due to innovations in infrastructure and offering. Virtually all Kinepolis complexes now have a self-service shop, which is a decisive factor in the increasing success of ITS. The shop’s offering is complemented with specific local initiatives.

Kinepolis Ghent as loyal partner of Film Fest Ghent (BE).

Our organization


For example, the coffee corner has been given a prominent place in the French Kinepolis cinemas and Kinepolis Antwerp has a Leonidas Chocolates Café. The Leonidas Chocolates Café serves up famous Belgian chocolates, as well as hot and cold beverages. Sushicque, an in-house sushi-bar, was opened in Alicante (Spain) in 2016. A second Sushicque will open at Kinepolis Madrid (Ciudad de la Imagen) in 2017.

In line with the large selection of movies, a varied range of refreshments is offered to meet the tastes of various target groups. Kinepolis targets a unique experience, which also covers the time before and after the movie.

Kinepolis offers a varied film and cultural program as well as event formulas like ‘Obscure Night’.

Kinepolis complexes present themselves as the ideal B2B location.

BUSINESS-TO-BUSINESSThe business-to-business (B2B) activity is built upon a privileged relationship with the business commu-nity and an innovative range. Since the digitization, Kinepolis cinemas, with their advanced, flexible infrastructure, are also ideal B2B venues for conferences, premieres and corporate events. Kinepolis’ B2B teams launch and run campaigns in association with companies and stimulate the sale of events and cinemas vouchers. The cinema is also the ideal venue for companies that wish to raise their profile through targeted advertising cam-paigns. Screen advertising, sampling, product placement, advertising panels and digital screens in the foyers also play their part in that.

Leonidas Chocolates Café at Kinepolis Antwerp (BE).


FILM DISTRIBUTIONKinepolis Film Distribution (KFD) focuses on distributing international and domestic movies in Belgium and Luxembourg. As a specialist in Flemish movies KFD has earned a strong position in Belgium. Through KFD Kinepolis stimulates the production and promotion of Flemish film in its role as a media company.

KFD also works closely with other partners, including Dutch FilmWorks (DFW). DFW is the largest independent film distributor in the Netherlands. In this partnership KFD distributes DFW catalog films in Belgium and Luxembourg.

SCREEN ADVERTISINGWith the acquisition of advertising agency Brightfish at the end of 2011 Kinepolis launched a new core business in Belgium. It also ensured that the Belgian cinema industry once again had a stable partner for screen advertising. Brightfish offers a wide array of media channels in and around the cinema for everyone who wishes to communicate with cinema visitors in a targeted way.

Kinepolis Jaarbeurs (Utrecht, NL) opening

Safety First premiere, Kinepolis Belgium

©Ru

ud V

onk


REAL ESTATEReal Estate is a separate business unit within Kinepolis tasked with coordinating the manage-ment, utilization and development of the Group’s property portfolio. Kinepolis owns the vast majority of its real estate, a situation that sets the group apart from many other cinema operators. In early 2017 Kinepolis had a portfolio of 49 complexes, comprising 528 screens and around 124 000 seats.

More than 70 000m² is let to third parties. Footfall at these businesses (mainly shops and cafes) is mostly generated by the presence of the Kinepolis complex.

Kinepolis Fenouillet (FR)

Kinepolis Jaarbeurs (Utrecht, NL)

The Magic Forest, Madrid (ES)

Brasserie Fifth Avenue at Kinepolis Breda (NL)

Kinepolis has a unique real estate position, a situation that sets it apart from many other cinema operators.

DIGITAL CINEMA SERVICESDigital Cinema Services (DCS) comprises all technical expertise at Kinepolis in digital projection and sound. This expertise is primarily used in-house, but Kinepolis DCS also provides technological services to third parties.


Our peopleMore than 2300 employees work hard every day to give millions of cinema visitors an unforgettable film experience. The talent and engagement of those employees is the key to Kinepolis’ success. Kinepolis wants to be a self-learning organization, which means that people are responsible for departmental targets and budgets, and are given the opportunity to show initiative and learn from each other. As an employer, Kinepolis aspires to get the best out of its employees, our motto is ‘Plus est en nous’.

K VALUES‘Client Focus’, ‘Teamwork’, ‘Operational Excellence’, ‘Flexibility’ and ‘Hands-on’ are the behavioral values that every Kinepolis employee works hard to put into practice. Every individual and every team is expected to ensure the customer is central, to work together towards a shared goal, to do his or her job properly and efficiently, to deal with change in a flexible way and show a sense of initiative and entrepreneurship.

TALENT FACTORYKinepolis has launched a Talent Factory to identify and evaluate talents in the company with an eye to development and promotion possibilities. Investments are also made in attracting talented individuals elsewhere who can help to further shape and professionalize the growing organization.

Training for every employee is another important aspect of the Human Capital philosophy. Kinepolis Academy helps employees improve their personal skills through e-learning among other things. There are also personal coaching courses for managers through the Kinepolis University.The motto within the Kinepolis human resources policy: ‘Plus est en Nous’


INNOVATION LABThe world is evolving all the time, as is the behavior of current and potential Kinepolis visitors, the relevant market and the possibilities of responding to this. The Kinepolis Innovation Lab was created based on the conviction that new, surprising ideas are the oxygen a company needs to remain successful and the realization that Kinepolis has more than 2 000 people in house and many of them may have some good ideas.

The introduction of an Innovation Lab stimulates everyone at Kinepolis – from student to manager – to think outside the box and dare to be ‘entre-preneurial’. As well as a self-learning organization, Kinepolis also wants to be a self-innovating organization. Every quarter, the best ideas are selected and teams are put together to flesh them out and implement them. The Innovation Lab also ensures that employees work together more, regardless of their departments. The best idea to come from the Kinepolis Innovation Lab is rewarded with an annual Innovation Award. Employees whose ideas are selected are also rewarded with an ‘entrepreneur bonus’ – regard-less of the subsequent performance of the idea in practice.

Teamwork

Client Focus

Plus est en Nous

SUSHICQUESushicque opened at Kinepolis Alicante (Spain) on 3 October 2016. Sushicque is a sushi bar concept developed and managed in-house by Kinepolis. The concept will be rolled out to Madrid in 2017. Sushicque is the first finalized project generated by the Kinepolis Innovation Lab, in which employees are challenged to submit and flesh out innovative ideas.

innovation_lab_logos_samen.indd 1 17/03/16 14:29


Green Star, our sustainability project

Within a broad social context, Kinepolis prioritizes the potential ecological, cultural or social conse-quences of its operations. Kinepolis is conscious of its social role and possible impact on all interest groups. The Kinepolis sustainability project is known as ‘Green Star’.

Green Star, in all its facets, carries increasing weight in the daily decision processes and opera-tional management.

ECOLOGICAL FOOTPRINT As well as the comfort of visitors and employees, the green parameters are also central concerns for the design of new complexes and the renovation of existing ones. Kinepolis endeavors to minimize its ecological footprint in its choice of energy sources and building materials and by using spaces flexibly.

A milestone in the sustainability policy was the digitization of the projection systems, which made the chemical production of film and the transport of voluminous rolls of film superfluous. Virtually all new build Kinepolis complexes in 2016 were exclusively equipped with laser projectors. Laser projectors ensure sublime image quality while also using 40% less energy than xenon lamp projectors. The absence of lamps also reduces the need for cooling and, of course, lamp replacement belongs to the past.

Artist impression of Kinepolis ’s-Hertogenbosch (NL)


The increasing importance of online and mobile ticket sales also reduces the ecological impact of operations. Further, various energy-saving measures have been taken, including the installation of LED lighting in cinemas and foyers, photo-luminescent row numbering and efficient heating systems.

Water consumption has been reduced, among other things by the use of taps with optical sensor, and visitors are constantly asked to presort their rubbish.

Ecological, social and environmental aspects are given the fullest consideration in new-build projects.

Laser projectors use 40% less energy than xenon lamp projectors.

Energy-saving steps are taken when renovating existing complexes.

GPR certification for Kinepolis DordrechtKinepolis works towards GPR certification for all new build complexes in the Netherlands. GPR provides insight into the sustainability of real estate based on five criteria: Energy, Environment, Health, Quality of Use and Future Value. Each aspect is graded from 1 to 10 and the CO₂ emission is measured. Kinepolis Dordrecht earned an excellent report across the board and already has its GPR certificate.

Innovative LED car park lighting in BredaThe Kinepolis Breda car park is exclusively lit by innovative LED lighting, which use 40% less energy than regular LEDs. The lighting also has a cradle-to-cradle certificate. Uniquely, because the BB LED lightpipe is the first LED product worldwide to earn this certificate. The suitability of this lighting solution for the car park at Kinepolis Antwerp is currently being evaluated.

Application of energy-saving techniquesIpee technology has been installed in the toilets at Kinepolis Jaarbeurs in Utrecht. These are smart sensors that optimize flushing after every use to ensure maximum hygiene without wasting water. In addition, the air conditioning system at Kinepolis Dordrecht is equipped with the innovative BaOPT system. This is a revolutionary technology that creates a much more natural and pleasant interior atmosphere while generating a significant reduction in energy consumption.

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ns


EMPLOYEE SATISFACTION Green Star is also about employee satisfaction. Kinepolis works to develop personal talents and teams and measures employee satisfaction every year (People Satisfaction Index, PSI). Kinepolis stimulates learning networks and so also a work environment that revolves around feedback and entrepreneurship.

SOCIOCULTURAL RESPONSIBILITY Kinepolis is also conscious of its sociocultural responsibilities, with regard to both programming and facilities in its complexes. Facilitating wheel-chair access and programming content that meets the wishes of cultural minorities are examples of how Kinepolis is working on integrating minorities even more. Kinepolis also supports various charities by sponsoring, patronage and benefit campaigns, or by stimulating social employment.

In 2016 Kinepolis supported various projects, including ‘Wings for Life’ and ‘Music for Life’ in Belgium, the Red Cross in Spain and ‘Bio Kinderrevalidatie’ in the Netherlands. In France Kinepolis installed a system to significantly improve the accessibility of cinemas for people with reduced vision or hearing in all cinemas. Furthermore, in 2016 ecological, social and environmental aspects were given the fullest consideration when develop-ing various new build projects.

Participation of Kinepolis in the ‘Wings for Life’ charity run. Blood donors are given a discount at Kinepolis in Spain.

Kinepolis invests in the development of personal talents.


Kinepolis wants to introduce its unique cinema concept in new markets and for new target groups to help create additional value for all stakeholders. Over the past three years Kinepolis has taken some big steps in the implementation of its expansion strategy. Over this period its com-plex portfolio has grown from 23 to 49. 2016 was another exceptional year of expansion for Kinepolis, with the opening of five new build complexes in the Netherlands, Spain and France, and the successful integration of complexes acquired earlier. Investments were also made in strengthening the organization to support this growth.

THE NETHERLANDSAfter the acquisition of Wolff Bioscopen and the Dutch Utopolis complexes in 2014 and 2015 respectively, in 2016 Kinepolis opened three new build cinemas in the Netherlands. Kinepolis Dordrecht was officially opened on 17 February 2016, as the first new-build Kinepolis Group cinema in almost a decade. Accommodating six screens and almost 1 200 seats, Kinepolis Dordrecht catches the eye with its unusual architectural style and location on the water.

Expansion

Kinepolis Dordrecht (NL)

Kinepolis Jaarbeurs (NL)


Kinepolis Enschede (NL)

Automated ticketing systems

In 2016 Kinepolis opened three new build projects in the Netherlands

A few months later – on 1 August 2016 – Kinepolis Breda opened to the public as Europe’s first all-laser cinema. The cinema has ten screens and 1 727 seats and is part of the ‘Breepark’ event zone. The laser projectors ensure superior image quality in every cinema room. In the Laser ULTRA room Barco’s Flagship Laser projector is combined with the immersive Dolby Atmos sound system.

Kinepolis ended the year in the Netherlands with the partial opening of Kinepolis Utrecht. The first six screens to be finished welcomed the general public for the first time on 14 December. The remaining eight screens were inaugurated on 7 March 2017. Kinepolis Jaarbeurs is Utrecht’s biggest complex and one of the biggest in the Netherlands with 14 screens and 3 200 seats. Kinepolis Jaarbeurs is the second complex after Kinepolis Breda that is fully equipped with laser projectors and there are also two Laser ULTRA rooms for visitors that are looking for an even more intense film experience.

Next to the numerous new build projects, the former Wolff cinemas in Enschede and Groningen were converted to the Kinepolis concept at the beginning of 2016. Both were equipped with the characteristic self-service shop, ticketing machines and the interior was thoroughly remodeled. Kinepolis Enschede (re)opened its doors on 29 January 2016 as the first Dutch cinema under the Kinepolis name. Kinepolis Groningen followed on 18 March 2016.

Kinepolis has plans for further expansion in the Netherlands in the years to come. Construction recently began for a new complex in ’s-Hertogen-bosch. The cinema will be built in the Paleiskwartier district and will have seven screens, with around 1 000 seats in total. The Paleiskwartier is an inner-city district currently under development next to ’s-Hertogenbosch central train station. The cinema will be nestled among offices, apartments, a supermarket and a restaurant. It is set to open in the first quarter of 2018. It will be the second Kinepolis complex in the province of North Brabant, after Kinepolis Breda.


FRANCEKinepolis began 2016 by taking over the operation of the cinema situated in the Saint-Sever shopping center in the heart of Rouen (Normandy). Formerly run by UCG, the cinema has 14 screens and 2 500 seats. It is the first Kinepolis cinema in Normandy.

The ‘Mégaroyal’ cinema in Bourgoin-Jallieu, which was acquired in 2015, was then converted to the Kinepolis concept. Kinepolis Bourgoin-Jallieu reopened its doors on 24 March 2016. And, in France too, Kinepolis ended the year by opening a new-build complex. The eight-screen, 1 100-seat Kinepolis Fenouillet is part of ‘La Galerie Espaces Fenouillet’, the new shopping and recreation center in the north of Toulouse.

The complex in Fenouillet is the first in France to be fully equipped with laser projectors, including a Laser ULTRA room.

In the meantime, construction is ongoing of the ‘Les Promenades de Brétigny’ retail park in Brétigny-sur-Orge, 35 kilometers south of Paris. This new leisure and restaurant center will house the first Kinepolis complex in the Île-de-France region. The 10-screen, 1 530-seat complex is expected to welcome around 500 000 visitors annually. Immochan will rent a wind-tight building with 6 500m² in floor space to Kinepolis. Kinepolis will take care of all cinema interiors and finishing. The cinema is scheduled to open in the third quarter of 2018.

Artist impression of the new Kinepolis in Brétigny-sur-Orge (FR)

Kinepolis Bourgoin-Jallieu (FR)

Kinepolis Fenouillet (FR)


SPAINThe first new build Kinepolis complex in Spain in almost 13 years opened on 23 November 2016. Kinepolis Nevada is part of the brand-new ‘Nevada’ shopping centre in Armilla in the southwest of Granada. The complex has eight screens, all equipped with laser projectors, and 1 693 seats. It is the first Spanish complex exclusively equipped with laser projectors.

Kinepolis already has a complex with 15 screens and 4 600 seats in Granada. This brand-new second complex will enable Kinepolis to strengthen its position in the region and offer the unique Kinepolis cinema experience to even more people.

Nevada shopping center (Granada, ES)

Opening Kinepolis Nevada (Granada, ES)

Kinepolis Nevada (Granada, ES)


BELGIUMKinepolis acquired the Belgian Utopolis cinemas in Aarschot, Mechelen, Turnhout and Lommel in April 2016 after the conditional approval of the Belgian Competition Authority. All complexes were subse-quently sold to the French cinema group UGC on 30 September 2016.

No new cinemas in Belgium, although a new theater has been added. On 14 December 2016 Kinepolis opened an IMAX theater with 4K laser projection and 400 seats at Kinepolis Brussels. IMAX with laser offers film-lovers in Brussels the sharpest, clearest, most vivid digital images on a 532m² screen, combined with an unparalleled immersive audio experience.

IMAX Brussels (BE)

IMAX theater with 4K laser projection and 400 seats at Kinepolis Brussels (BE)

IMAX with laser offers film-lovers the most vivid digital images on a 532m² screen.

Kinepolis continues to invest in expansion, evaluating several projects in various countries – both potential acquisitions and new build. The Group policy is not to make any announce-ments on expansion projects until they are finalized and all formalities have been completed.


In Europe the visitor numbers increased in 2016 compared with the previous year. Western Europe (19 countries) posted a rise in the number of visitors with 892.9 million visitors in 2016, compared with 866.0 million visitors in 2015.

General market information

In Eastern and Central Europe and the Mediterranean (16 countries) (1) total visitor numbers increased, from 344.5 million in 2015 to 383.8 million in 2016.

The Western European countries with the biggest rise in visitor numbers in 2016 were Norway (+9%), Spain (+6%), Ireland (+4%), the Netherlands (+3.7%), Sweden and France (+3.6%), Portugal (+2.5%) and Greece (+2.2%).

In Eastern and Central Europe and the Mediterranean Slovakia (+23.4%), the Czech Republic (+20.6%) and Poland (+16.5%) posted the biggest rise compared to the previous year. The European countries with a decrease in 2016 compared with 2015 were Germany, Austria, Belgium and Switzerland.

DIGITIZATION IN EUROPE The number of digital screens in Belgium continued to rise in 2016. At the beginning of 2017 Europe had just under 38 000 digital screens, compared with 36 538 the year before. The average penetration is now 97%, with Spain, Romania and Turkey at 95%, but 13 (mainly Eastern European) countries still fall a long way short.

02 / ANNUAL SUMMARY

Gross BO Revenue CEE and Mediterranean Rim Gross BO Revenue Western Europe

Cinema going europe

0

200

400

600

800

1 000

100

300

500

700

900

0

2 000

3 000

1 000

4 000

5 000

6 000

7 000

8 000

2012 2013 2014 2015 2016

Admissions CEE & Mediterranean Rim Admissions Western Europe

(in ’000) (in ’000)

2012 2013 2014 2015 2016

Total admissions in Europe (in ’000)

Admissions Western Europe 860 903 819 517 816 541 865 959 892 916

Admissions CEE and Mediterranean Rim 294 751 317 143 334 461 344 543 383 768 (1)

TOTAL 1 155 654 1 136 660 1 151 002 1 210 502 1 276 684

Gross Box Office Revenue in Europe (in ’000 €)

Gross BO Revenue Western Europe 6 351 507 6 023 719 6 047 085 6 797 547 6 743 245

Gross BO Revenue CEE and Mediterranean Rim 1 509 749 1 503 639 1 251 143 1 240 055 1 510 608

TOTAL 7 861 256 7 527 358 7 298 228 8 037 602 8 253 853

Average ticket prices (€)

ATP Western Europe 7.38 7.35 7.41 7.85 7.55

ATP CEE and Mediterranean Rim 5.12 4.74 3.74 3.60 3.94

TOTAL 6.80 6.62 6.34 6.64 6.47

CINEMA-GOING IN EUROPE

Source: Mediasalles - Cinema-Going in Europe in 2016(1) Excluding Malta for which the figures 2016 still are provisional

28 KINEPOLIS GROUP ANNUAL REPORT 2016

2016 at a glance

13 JAN 2016Takeover of the operation of a

cinema in Rouen (FR)

29 JAN 2016Reopening of Kinepolis Enschede (NL) after remodeling

17 FEB 2016Opening of Kinepolis

Dordrecht (NL)

FEB 2016Launch of Meet me at Kinepolis app in Belgium

18 MAR 2016Reopening of Kinepolis Groningen (NL) after remodeling

24 MAR 2016Reopening of Kinepolis Bourgoin-

Jallieu (FR) after remodeling

25 MAR 2016BMA approval of the acquisition of Utopolis Belgium by Kinepolis, subject to the sale of Utopolis Mechelen and Aarschot

14 APR 2016Acquisition of the Belgian

Utopolis cinemas 11 MAY 2016Appointment of Ms. Adrienne Axler as Independent Director of Kinepolis Group3 JUN 2016

First stone-laying of ‘Les Promenades de Brétigny’ with

first Kinepolis complex in Île-de-France

JUL 2016Launch of new Kinepolis website 1 AUG 2016

Opening of Kinepolis Breda (NL)

30 SEP 2016Sale of Utopolis Belgium to UGC

3 OCT 2016Opening of Sushicque at

Kinepolis Plaza Mar 2 (Alicante, ES) 23 NOV 2016Opening of Kinepolis Nevada (Granada, ES)

14 DEC 2016Opening of IMAX Brussels (BE)

14 DEC 2016Opening of first six screens at Kinepolis Jaarbeurs (Utrecht, NL)

16 DEC 2016Opening of Kinepolis Fenouillet

(Toulouse, FR) CONTINUOUSRollout of Cosy Seats

CONTINUOUSRollout of new cinema

ERP system Vista

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29KINEPOLIS GROUP ANNUAL REPORT 2016

Management Report

Kinepolis Antwerpen (BE)

30 KINEPOLIS GROUP ANNUAL REPORT 201603 / MANAGEMENT REPORT

Discussion of the results2016 was an exceptional year of expansion for Kinepolis, with the opening of five new build cinemas in the Netherlands, Spain and France, and the successful integration of acquired cinemas. In spite of the less strong film offer, the European football championship and fewer holidays in 2016, the Group posted solid results, with a rise in REBITDA per visitor in virtually all countries.

Kinepolis welcomed 7.5% more visitors in 2016 compared with the previous year, primarily due to acquisitions in 2015 that were included in the figures for the whole year for the first time, the acquisition of a cinema in Rouen (France) in January 2016 and newly opened cinemas in the Netherlands (Dordrecht, Breda, Utrecht), Spain (Granada) and France (Fenouillet). The film offer in 2016 was unable to match an exceptional 2015, which included ‘Star Wars: The Force Awakens’, ‘Minions’ and ‘Jurassic World’, and local content also disappointed in most countries, except for France, due to the success of ‘Les Tuche 2’. The later Christmas holiday and the European football championship also played a role in the lower visitor numbers.

Total revenue increased faster than visitor numbers, thanks to the rise in revenue across all activities. Only Brightfish generated less revenue. Sales of beverages and snacks (In-theatre sales) rose, in spite of the negative impact of the country mix due to the lower share of Belgium. More products were bought per person in all countries and there was a relative increase in the number of shop visitors in Belgium and the Netherlands. Revenue from ticket sales (Box Office) rose a little less sharply than visitor numbers, primarily due to the changed country mix and the loss of part of the Virtual Print Fee (VPF).

31KINEPOLIS GROUP ANNUAL REPORT 2016 03 / MANAGEMENT REPORT

REVENUE BY COUNTRY in 2016 vs 2015

REVENUE BY ACTIVITY in 2016 vs 2015

REVENUETotal revenue in 2016 was € 324.9 million, an increase of 7.7% compared with 2015. Revenue rose more strongly than visitor numbers (+7.5%), due to the slightly higher revenue per visitor and the rise in revenue from B2B activities (+9.5%), real estate (+11.9% at constant exchange rate) and KFD (+38.0%), partly offset by the disappointing revenue of Brightfish (-12.8%).

Revenue from ticket sales (box office, BO) increased by 7.3%, while revenue from food and beverages (in-theatre sales; ITS) increased by 9.6%. BO revenue per visitor fell by -0.2% due to the changed country mix and the loss of part of the VPF revenue. ITS revenue per visitor rose by 1.9%.

Box Office revenue rose by 7.3% to € 175.6 million, growing less strongly than visitor numbers, primarily due to the changed country mix after expansion, with a lower share for Belgium, and the loss of part of the VPF.

The increase in the visitor numbers (+7.5%) was entirely due to the expansion.

B2B revenue increased due to the expansion, higher sales of cinema vouchers to businesses and higher revenue from screen advertising in all countries except for Belgium, where the national advertising market declined further. Revenue from real estate activities also rose, primarily due to higher revenue from concessions operated by the company, a higher occupancy rate and the impact of the expan-sion. After a less positive 2015, Kinepolis Film Distribution (KFD) experienced an outstanding 2016, primarily due to successful local releases such as ‘Safety First’ and ‘Achter de Wolken’ in the spring and ‘De Premier’ and ‘De Buurtpolitie’ in the autumn. The revenue of Brightfish decreased, as a consequence of the further drop in revenue from Belgian screen advertising.

Current EBITDA rose less strongly, by 4.0% to € 94.6 million, primarily due to the changed country mix, the ongoing process of integrating acquired cinemas and the acquisition of Utopolis with partly leased complexes. REBITDA per visitor increased in all countries except for France.

De Premier

Film distribution2%

B2B14%

Real Estate4%

Brightfish4%

In-theatre sales22%

22%54%

1%5%4%

14%

2016

Box office54%

2015

Switzerland Poland1%

Luxembourg 5%

The Netherlands11%

Spain13%

France22%

21%

55%

2%1%

13%

8%

2015 2016

Belgium48%


The top 5 of 2016 were ‘Finding Dory’, ‘Fantastic Beasts and Where to Find Them’, ‘The Jungle Book’, ‘The Revenant’ and ‘Rogue One: A Star Wars Story’. The most successful local films were ‘Safety First’ and ‘De Premier’ in Belgium, ‘Les Tuche 2’ and ‘Radin’ in France, ‘Soof 2’ and ‘Rokjesdag’ in the Netherlands and ‘A Monster Calls’ and ‘Palmeras en la Nieve’ in Spain.

In-theatre sales increased by 9.6% due to the higher visitor numbers and the stronger ITS revenue per visitor (+1.9%). Besides the positive impact of price optimizations, there was a rise in the number of products bought per visitor in all countries and a relative increase in the number of shop visitors in Belgium and the Netherlands. The rise was tempered by the lower share of Belgium and the higher share of France in the country mix. The Netherlands posted a slight fall due to the addition of Utopolis and ITS revenue per visitor also fell in France due to the integration of the acquired cinemas in Longwy and Rouen.

B2B revenue rose by 9.5% due to the expansion, increased sales of cinema vouchers to businesses and a rise in the revenue from screen advertising (+9.2%). Screen advertising posted growth in all countries, due among other things to the expan-sion, except in Belgium where revenue from screen advertising fell sharply.

Real estate revenue rose by 11.9% (at fixed exchange rates) thanks to higher revenue from concessions operated by the company, a higher occupancy rate, a higher variable rent in Poland and, lastly, the expansion, particularly because of the addition of Utopolis.

Total revenue in 2016 was € 324.9 million, an increase of 7.7% compared with 2015.

The revenue of Kinepolis Film Distribution (KFD) rose by 38,0% thanks to a good first quarter, which included ‘Safety First’ and ‘Achter de Wolken’, a strong autumn thanks to the local hits ‘De Premier’ and ‘De Buurtpolitie’, and the success of ‘Bad Moms’ and ‘Mechanic 2: Resurrection’.

Brightfish generated 12.8% less revenue, prima-rily due to the further reduction in revenue from national screen advertising in Belgium, as a consequence of the European football champi-onship and continued strong competition from TV and online advertising. The number of advertisers rose slightly, but the budget per campaign declined.

REBITDACurrent EBITDA (REBITDA) rose by 4.0% to € 94.6 million and the REBITDA margin decreased from 30.2% to 29.1%. The changed country mix, with a lower share for Belgium, the ongoing process of integrating acquired cinemas and higher costs related to organizational changes due to the expansion meant that it grew less strongly than the visitor numbers.

REBITDA per visitor fell by 3.3% to € 3.97, due to the changed country mix and the addition of Luxembourg. REBITDA per visitor rose in all other countries except in France, due to the addition of acquired cinemas in Rouen and Longwy.

Achter de Wolken

Safety First

De Buurtpolitie


PROFIT FOR THE PERIODCurrent profit in 2016 was € 40.4 million, a fall of 6.5% compared with 2015 (€ 43.2 million), due to higher depreciations as a consequence of the expansion and a higher effective tax rate.

Total profit was € 47.6 million, compared with € 32.3 million in 2015, an increase of 47.7%, due to the one-off provision in 2015 in response to the decision of the European Commission on the Belgian Excess Profit Ruling (EPR) and the revenue from the sale of Utopolis Belgium in 2016.

The biggest non-current items in 2016 were the result from the sale of Utopolis België NV (€ 8.7 million), the impact of the change in the corporate tax rate in France on deferred tax (€ 1.0 million) and transformation and expansion costs (€ -2.0 million). The income tax expenses on these non-current items were € 1.0 million.

The biggest non-current items in 2015 were the EPR provision (€ -9.4 million), transformation and expansion costs (€ -1.8 million) and a number of other costs (€ -0.6 million). The income tax expenses on these non-current items were € 0.8 million.

The net financial expenses decreased by € 0.1 million or 1.7% to € 7.6 million.

The effective tax rate was 29.9% compared with 27.6% in 2015, primarily due to the withdrawal of the excess profit ruling, offset by the adjustment of the deferred tax liability (DTL) due to the fall in corporate income tax in France as of 2019.

The profit per share was € 1.75, which is 47.1% higher than in 2015.

FREE CASH FLOW AND NET FINANCIAL DEBTThe free cash flow was € 53.6 million compared to € 66.0 million in 2015.

The lower free cash flow was due to a higher tax bill (€ -10.7 million), a higher interest payment (€ -3 million) and more maintenance investments (€ -1.5 million), slightly offset by a positive working capital effect due to the growth of the company.

The free cash flow after expansion investments, dividends and share buybacks was € -7.4 million, € 28.6 million lower than the year before, due to € 1.5 million less dividend payments, € 10.7 million less in investments in internal expansion and acquisitions, € 35.1 million more in assets sales, partly offset by € 6.4 million less in share buy-backs and € 3.0 million more in paid interest.

In 2016, € 84.5 million was invested in the purchase of fixed assets, primarily as a conse-quence of the construction of the new complexes in the Netherlands, France and Spain and mainte-nance and remodeling investments.

Net financial debt was € 169.8 million at 31 December 2016, an increase of only 4.8% compared with the end of 2015 (€ 162.0 million), in spite of the investments in expansion and maintenance.

The total gross financial debt decreased by € 8.5 million to € 214.3 million at 31 December 2016 compared to € 222.8 million at 31 December 2015.Fantastic Beasts

The Revenant

The Jungle Book


BALANCE SHEETFixed assets (€ 424.1 million) represented 84.2% of the balance sheet total at 31 December 2016 (€ 503.4 million). This includes land and buildings (including investment property) with a carrying amount of € 292.6 million.

Equity was € 149.9 million at 31 December 2016. Solvency was 29.8%, compared with 25.1% in 2015.

DIVIDEND OF € 0.87 PER SHAREThe Board of Directors will propose to the General Meeting of 10 May 2017 application of a pay-out ratio of 50% of net profit, resulting in an amount of € 23 692,580. Taking into account the number of shares entitled to dividend on 17 February 2017, which is 27 232,851, this means a gross dividend of € 0.87 per share for the financial year 2016. This represents an increase of 10.1% compared to 2015 (€ 0.79 per share). The dividend will be made available from 16 May 2017 (ex-date: 12 May 2017, record date: 15 May 2017).

IMPORTANT EVENTS AFTER THE END OF THE FISCAL YEAR 2016Kinepolis has obtained all necessary permits to begin construction of a new cinema in ’s-Hertogen-bosch (Netherlands). The cinema will be built in the Paleiskwartier district and will have seven screens, with around 1 000 seats in total. The Paleis-kwartier is an inner-city district currently under development next to ’s-Hertogenbosch central train station. The cinema will be nestled among offices, apartments, a supermarket and a restau-rant. Kinepolis targets 350 000 visitors per year in ’s-Hertogenbosch. In the meantime construction has begun and the cinema is set to open in the first quarter of 2018. It will be the second Kinepolis cinema in the province of North Brabant, after Kinepolis Breda.

In 2016 Kinepolis continued to roll out its new cinema ERP system, known as Vista, in virtually all of its complexes. Vista is the software package behind all important operational processes, from film description to popcorn sales. The new system offers uniformity and enables the central management of data, which is important in the light of the current and future growth of the Group. Vista is currently operatio-nal in all Kinepolis cinemas except the former Utopolis complexes in the Netherlands and Luxembourg. The new ERP system will also be operational in these complexes by April 2017.

In the wake of the website, the new Kinepolis apps for Android and iOS users were released at the end of January 2017. The apps have a renewed user-friendly design, ensuring a more personalized experience, just like the website. For the first time, tickets are now delivered directly in the app, through the user’s ‘My Kinepolis’ account. The ticket in the app contains a barcode that can be conveniently scanned at the cinema. Select the film and the cinema, pay and receive the ticket: that is now all possible with a few taps in the Kinepolis app.

New Kinepolis app


Corporate Governance Statement

The Board of Directors approved a revised version of the Corporate Governance Charter of Kinepolis Group NV on 16 February 2017 in response to the introduction of a new Dealing Code. The Charter can be consulted at the Kinepolis Investor Relations website.

In this chapter of the annual report more factual informa-tion is provided on the Corporate Governance policy pursued in the fiscal year 2016, together with an explana-tion of the deviations from the Code in accordance with the ‘comply or explain’ principle.

SHARE CAPITALThe share capital at 31 December 2016 was € 18 952 288.41.

The share capital was represented by 27 365 197 shares without mentioning the nominal value, all of which give the same rights to holders.

After the delivery of 111 875 shares within the framework of the exercise of options, at 31 December 2016 Kinepolis Group held 132 346 treasury shares with a capital value of € 91 658.74.

The Extraordinary General Meeting of 11 May 2016 autho-rized the Board of Directors to acquire 410 958 shares of the company to cover the new options to be issued under the 2016 Share Option Plan and also decided, if the Board of Directors deems it expedient, to use 132 346 shares acquired under the earlier authorizations to cover the new options to be issued under the 2016 Share Option Plan.

RIGHTS TO NOMINATE CANDIDATES FOR A SEAT ON THE BOARD OF DIRECTORSAccording to the articles of association, eight directors can be appointed from among the candidates nominated by Kinohold Bis SA, limited company under the laws of Luxembourg, insofar as it or its legal successors, as well as all entities directly or indirectly controlled by (one of) them or (one of) their respective legal successors (within the meaning of Article 11 of the Companies Code) solely or jointly hold at least thirty-five per cent (35%) of the shares of the Company, both when the candidate is nominated and when the candidate is appointed by the General Meeting, on

the understanding that, if the shares held by Kinohold Bis SA or its respective legal successors, as well as all entities directly or indirectly controlled by (one of) them or (one of) their respective legal successors (within the meaning of Article 11 of the Companies Code) represent less than thirty-five per cent (35%) of the capital of the Company, Kinohold Bis SA or its respective legal successors shall only be entitled to nominate candidates to the Board of Directors for each group of shares representing five per cent (5%) of the capital of the Company.

SHAREHOLDER AGREEMENTSKinepolis Group NV is not aware of any shareholder agreements that could restrict the transfer of securities and/or the exercise of voting rights in the context of a public acquisition bid.

CHANGE OF CONTROLUnder the terms of the Credit Facility Agreement concluded on 15 February 2012 between, on the one hand, Kinepolis Group NV and a small number of her subsidiaries, and on the other, Fortis Bank NV, KBC Bank NV and ING Belgium NV, and as amended and renewed on 22 June 2015, 17 December 2015 and 13 December 2016, a participating financial institution can end its participation in that agree-ment, in which case the relevant part of the outstanding loan amount will be immediately due if other natural persons or legal entities than Kinohold Bis SA (or its legal successors) and Mr. Joost Bert acquire control (as defined in the Credit Agreement) of Kinepolis Group NV.

Furthermore, in case of a change of control, under the General Terms and Conditions of the Listing and Offering Prospectus dated 17 February 2012 with regard to a bond issue in Belgium, any bond holder will have the right to oblige Kinepolis Group to repay the nominal amount of all or a part of the bonds, under the conditions set forth in the Prospectus. This Prospectus can be consulted at the Kinepolis Investor Relations website.

Furthermore, under the General Terms and Conditions of the Prospectus dated 12 May 2015 concerning an Unconditional Public Offer to Exchange the aforementioned bonds, in case of a change of control (as defined in the

03 / MANAGEMENT REPORT36 KINEPOLIS GROUP ANNUAL REPORT 2016

Prospectus) any bond holder will have the right to oblige Kinepolis Group NV to refund the nominal amount of all or a part of the bonds, under the conditions set forth in the Prospectus. This Prospectus can also be consulted at the Kinepolis Investor Relations website.

Lastly, there is a clause in the General Terms and Conditions dd. 16 January 2015 with regard to the private placement of bonds with institutional investors valued at € 96.0 million euros in the event of a change of control that is identical to the one set down in the aforementioned Prospectus.

SHAREHOLDER STRUCTURE AND RECEIVED NOTIFICATIONS Based on the notifications received within the framework of Article 74 of the Public Acquisition Bids Act of 1 April 2007, from Kinepolis Group NV, Kinohold Bis SA, Stichting Administratiekantoor Kinohold, Joost Bert, Koenraad Bert, Geert Bert and Peter Bert, acting by mutual agreement (either because they are ‘affiliated persons’ within the meaning of Article 11 of the Companies Code or they are otherwise acting by mutual agreement) and collectively holding more than 30% of the voting shares of Kinepolis Group NV, on subsequent transparency statements (within the meaning of the Act of 2 May 2007 and the Royal Decree of 14 February 2008 regarding the disclosure of major holdings) and statements within the meaning of the share buyback program, as of 31 December 2016:

★ Kinohold Bis SA held 12 700 050 shares or 46.41% of the shares of the Company; Kinohold Bis SA is controlled by Stichting Administratiekantoor Kinohold under Dutch law, which in turn is jointly controlled by the following natural persons (in their capacity as directors of Stichting Administratiekantoor Kinohold): Joost Bert, Koenraad Bert, Geert Bert and Peter Bert;

★ Kinohold Bis SA otherwise acts in close consultation with Joost Bert;

★ Kinepolis Group NV, which is controlled by Kinohold Bis SA, held 132 346 shares or 0.48% treasury shares;

★ Mr. Joost Bert, who acts in close consultation with Kinohold Bis SA, held 554 540 shares or 2.03% of the shares of the Company.

SHAREHOLDER NUMBER OF SHARES %

Kinohold BIS 12 700 050 46.41

Mr. Joost Bert 554 540 2.03

Kinepolis Group NV 132 346 0.48

Free Float, of which: 13 978 261 51.08

- Axa SA 1 523 555 5.57- BNP Paribas Investment

Partners 1 365 695 4.99

TOTAL 27 365 197 100%

SHAREHOLDERS’ STRUCTURE AT 31 DECEMBER 2016 (1)

(1) The transparency declaration of 28 February 2017 shows that BlackRock Investment Management Ltd held a 4.10% stake in Kinepolis group NV on the aforementioned date. The transparency declaration of 14 February 2017 shows that Ameriprise Financial Inc. held a 3.05% stake in Kinepolis group NV on the aforementioned date.

03 / MANAGEMENT REPORT 37KINEPOLIS GROUP ANNUAL REPORT 2016

AMENDMENTS TO THE ARTICLES OF ASSOCIATIONAmendments can be made to the articles of association with due consideration for the stipulations in the Companies Code.

BOARD OF DIRECTORS AND SPECIAL COMMITTEESComposition of the Board of DirectorsThe Board of Directors consists of nine members, six of whom are independent of the majority shareholders and management. These directors fulfil the criteria for indepen-dent directors as stated in the Article 526 ter of the Companies Code ‘establishing the criteria for independent directors’ and were appointed upon nomination by the Board of Directors, which was advised on this matter by the Nomination and Remuneration Committee. The majority shareholders did not use their nomination right with regard to these appointments.

The Board regularly reviews the criteria for its composi-tion and of its committees, in light of ongoing and future developments and expectations, as well as its strategic objectives. In the coming years the Board will give attention to the appropriate complementarity and diversity among its members, including gender and age diversity, and ensure a balance between innovation and continuity in order that the acquired knowledge and history can be passed on efficiently in the Board and its committees. As part of this, the Board was diversified further with the appointment of Adrienne Axler, CEO of the DACH region (Germany, Austria, Switzerland) of the Sodexo Group.

Contrary to Stipulation 2.9 of the Belgian Corporate Governance Code 2009, the Board of Directors has not appointed a secretary, as it believes these duties can be fulfilled by the President assisted by the Senior Legal Advisor, bearing in mind the limited size of the Company.


From the left: Jo Van Biesbroeck, Rafaël Decaluwé, Joost Bert, Annelies van Zutphen, Philip Ghekiere, Marion De Bruyne, Eddy Duquenne and Geert Vanderstappen

COMPOSITION BOARD OF DIRECTORS

NAME POSITION TERM ENDS OTHER POSITIONS AT LISTED COMPANIES

ATTENDANCE RECORD (8)

Mr. Philip Ghekiere (1) (2) Chairman 2020 / All meetings

Mr. Eddy Duquenne CEO 2020 / All meetings

Mr. Joost Bert (2) CEO 2020 / All meetings

Ms. Marion Debruyne, permanent representative of Marion Debruyne bvba

Independent Director 2017 Recticel NV: Director All meetings

Ms. Annelies van Zutphen, permanent representative of Zutphen Consulting bv (3)

Independent Director 2017 / All meetings

Mr. Rafaël Decaluwé, permanent representative of Gobes Comm. V.

Independent Director 2017 Jensen Group NV:

Chairman All meetings

Mr. Jo Van Biesbroeck, permanent representative of JoVB bvba

Independent Director 2017 Telenet NV:

Director All meetings

Mr. Geert Vanderstappen, permanent representative of Pallanza Invest bvba (4)

Independent Director 2018 Smartphoto Group NV:

Director Seven meetings

Ms. Adrienne Axler (since 11 May 2016) Independent Director 2018 / Four meetings

(1) Non-executive director(2) Represent the majority shareholders (3) After the discharge of Mrs. Annelies van Zutphen, Van Zutphen Consulting bv was co-opted on 23 March 2016

by the Board of Directors, which was certified by the General Assembly on 11 May 2016.(4) Management Center Molenberg bvba was taken over by Pallanza Invest bvba on 19 July 2016.

The table below shows the composition of the Board of Directors as well as the attendance record of the respectively directors to the eight meetings that took place in 2016.

Adrienne Axler was appointed as Independent Director of Kinepolis Group on 11 May 2016.


Activity Report of the Board of DirectorsIn addition to the duties assigned to the Board of Directors by the Companies Code, the articles of association and the Kinepolis Corporate Governance Charter, the following items were handled on a regular basis:

★ Review of the monthly revenues and financial results together with the forecasts;

★ Evolution in the customer and personnel satisfaction index;

★ Progress reports on ongoing cinema and real estate projects;

★ Discussion and decision on new cinema and property opportunities;

★ Up-to-date treasury situation and cash flow forecast.

Appropriate attention was also given inter alia to the following items:

★ Discussion and establishment of the profit and investment plan for the following fiscal year;

★ Evaluation and approval of expansion projects; ★ Determination of the short-term and long-term

strategy; ★ The short- and long-term financing; ★ Reports of the Nomination and Remuneration

Committee and the Audit Committee; ★ Evaluation and establishment of the quantitative and

qualitative management targets for the Executive Management;

★ Assessment of the functioning of the Board of Directors and its committees;

★ Restructuring of the ICT architecture; ★ The primary risks to which the Company can be exposed

to and the measures to control them.

Other items, including human resources, external communi-cation, investor relations, disputes and legal issues are addressed as needed or desired.

At least nine meetings are scheduled in 2017. Additional meetings may be held if needed.

Composition and activity report of the Nomination and Remuneration CommitteeIn accordance with the possibility provided for in the Corporate Governance Code, Kinepolis Group has one joint committee – the Nomination and Remuneration Committee. This committee consists of the following non-executive directors, the majority of whom are independent directors with the necessary expertise and professional experience in human resources, bearing in mind their previous and/or current business activities:

★ Mr. Philip Ghekiere (Chairman Kinepolis Group NV and Managing Partner at Metis Capital);

★ Gobes Comm. V., whose permanent representative is Mr. Rafaël Decaluwé (former CEO of Bekaert NV and Chairman of the board of Jensen Group NV);

★ JoVB BVBA, whose permanent representative is Mr. Jo Van Biesbroeck (for years senior manager at AB Inbev).

The Chief Executive Officers may attend the meetings of the Nomination and Remuneration Committee (NRC) by invitation.

The NRC met three times in 2016 in the presence of all members and mainly dealt with the following:

★ Evaluation of the management targets for the Executive Management and establishment of the variable remuneration for the fiscal year 2015;

★ Evaluation of the criteria for granting the balance of the outperformance bonus for the fiscal year 2014;

★ Qualitative and quantitative management targets with regard to the fiscal year 2016 for the Executive Management and the corresponding variable remuneration;

Kinepolis Fenouillet (FR) opening ceremony


★ The evaluation and remuneration policy for the senior management;

★ The evaluation process and bonus policy for budget owners;

★ The possible introduction of a new share option plan, arrangements for its implementation and the allocation of the share options;

★ The evolution in the composition of the Board of Directors and the ensuing process for selecting and appointing candidates;

★ Preparation of the Remuneration Report.

Composition and activities report of the Audit Committee Pursuant to Article 526 bis of the Companies Code, the Audit Committee was exclusively composed of non-execu-tive and independent directors with the appropriate expertise and professional experience in accounting and auditing, bearing in mind their previous and/or current business activities:

★ Pallanza Invest bvba, whose permanent representative is Mr. Geert Vanderstappen, who combines five years’ experience as Corporate Officer at Generale Bank’s Corporate & Investment Banking with seven years’ operational experience as CFO at Smartphoto group NV and is now Managing Partner at Pentahold;

★ Gobes Comm. V, whose permanent representative is Mr. Rafaël Decaluwé, who is a former CEO of Bekaert NV and had a long career in financial management positions at a number of multinationals, including Samsonite, Fisher-Price and Black & Decker.

The Chief Financial Officer, the Chief Executive Officers and the internal auditor attend the meetings of the Audit Committee.

The representatives of the majority shareholders may attend meetings upon invitation.

In 2016 the Audit Committee met four times, with all members present (or represented), and primarily the following items were handled:

★ Discussion on financial reporting in general and the unconsolidated and consolidated annual and interim financial statements in particular;

★ Discussion, establishment and monitoring of the internal audit activities, including the discussion of the annual report of the Internal Audit department;

★ Discussion and evaluation of the internal control and risk management systems as well as the annual risk management action plan;

★ Evaluation of the effectiveness of the external audit process;

★ Evaluation of the functioning of the internal auditor; ★ Monitoring of the financial reporting and its compliance

with the applicable reporting standards; ★ Proposal for the reappointment of the statutory auditor

for the period 2016-2019.

Evaluation of the Board of Directors, its committees and its individual directorsAs part of the open and transparent way in which the meetings of the Board and it committees are held, its operation and performances are constantly and informally evaluated during the meetings, as is the interaction with the Executive Management, which is communicated within the same transparent way.

In 2017 the Board once again has plans to have a thorough education in order to optimize, on the basis of the results thereof, the existing Management and process structures.


EXECUTIVE MANAGEMENT The Executive Management consists of both Chief Executive Officers. The Board of Directors is authorized to appoint additional members of the Executive Management.

INSIDER TRADING POLICY – CODE OF CONDUCT – TRANSACTIONS WITH RELATED PARTIESIn 2016 the insider trading policy was brought into line with the new EU insider trading rules of 16 April 2014, which came into force on 3 July 2016. This Dealing Code applies to the members of the Board of Directors, the Chief Executive Officers and other persons who might have inside knowl-edge. The Protocol is designed to ensure that share trading by the persons in question only occurs strictly in accordance with applicable EU and national rules and in accordance with the guidelines issued by the Board of Directors. The Chief Financial Officer is responsible, as Compliance Officer, for monitoring compliance with the rules on insider trading as set out in this Protocol.

With regard to the proceedings brought by FSMA’s Management Committee against Kinohold Bis SA, Mr. Joost Bert, PGMS NV, Mr Philip Ghekiere and Mr Eddy Duquenne due to alleged insider dealing with regard to their purchase of shares for their account in 2011, the Court of Appeal in Brussels confirmed on 1 March 2017 the administrative sanctions imposed by the Sanctions Committee. The aforementioned persons have notified the Company that their good faith in this matter was not questioned by the Court of Appeal. The Board of Directors confirmed her trust in these persons.

A Code of Conduct has also been in force since 2013, containing the appropriate guidelines, values and standards with regard to the ethical and fitting way Kinepolis wishes to treat employees, customers, suppliers, shareholders and the general public.

The transactions with related parties as included in Note 28 to the Consolidated Financial Statements were conducted in complete transparency with the Board of Directors.

REMUNERATION REPORTKinepolis Group tries to provide transparent information regarding the remuneration of members of the Board of Directors and the Executive Management to its sharehold-ers and other stakeholders.

Procedure for establishing the remuneration policy and level for the Board of Directors and the Executive Management

PrinciplesThe principles of the remuneration policy and level for the directors and the Executive Management are stated in the Company’s Corporate Governance Charter.

The remuneration policy is designed in such a way that the remunerations for the directors and the Executive Management are reasonable and appropriate enough to attract, retain and motivate the persons meeting the profile established by the Board of Directors, with due consideration for the size of the Company and the external benchmark data.

The following principles are also used:

★ For the fulfilment of their duties as a member of the Board of Directors, the non-executive directors receive a fixed amount taking account of an attendance of a minimum number of meetings of the Board of Directors they attend;

★ The members of the committees are allocated a fixed amount every time they attend a meeting for the committee, with additional fixed remuneration for the president of the Audit Committee and of the Nomination and Remuneration Committee;

★ The Chairman of the Board of Directors and the Chief Executive Officers are allocated a fixed annual amount for participating in the meetings of the Board of Directors;


★ The non-executive directors do not receive any bonuses, participation in long-term share-based incentive programs, benefits in kind (with the exception of the right to attend a number of film screenings each year) or benefits related to pension plans;

★ Alongside a fixed remuneration, the Executive Management receives variable remuneration dependent on the attainment of the management targets set by the Board of Directors on the recommendation of the Nomination and Remuneration Committee. These include both quantitative targets, which are set and measured annually based on the improvement of the financial results compared to the previous year, and qualitative targets, which are defined as targets that are to be attained over several years, progress of which is evaluated on an annual basis. The variable part of the remuneration ensures that the interests of the Executive Management run parallel to the Group’s, lead to value creation and loyalty, and provide the appropriate incentive to optimize the short-term and long-term objectives of the Group and its shareholders. 30% of the variable remuneration is linked to the attainment of the qualitative targets and 70% is linked to the attainment of the quantitative targets;

★ As well as this variable remuneration, long-term incentives in the form of share options or other financial instruments of the Company or its subsidiaries may also be allocated to the Executive Management. The remuneration package for the Executive Management may additionally include participation in the corporate pension plan and/or the use of a company car;

★ The Company’s formal right to claim back variable remuneration granted on the basis of incorrect financial data was not explicitly provided for in such cases;

★ The exit compensation of a member of the Executive Management in the event of early termination of a contract (entered into after 1 July 2009) will not exceed twelve (12) months’ basic and variable remuneration. A higher compensation may be granted in specific justifiable circumstances, on the recommendation of the NRC and with the prior approval of the General Meeting, but may never exceed eighteen (18) months’ basic and variable remuneration. In any event, the exit compensation may not exceed twelve (12) months’ basic remuneration and the variable remuneration cannot be taken into account if the departing person has not met the performance criteria referred to in his or her contract.

B2B event at Kinepolis Madrid (ES)


ProcedureThe annual overall remuneration for the members of the Board of Directors will be determined by the General Meeting following a proposal from the Board of Directors advised by the Nomination and Remuneration Committee, which will be based on the amounts set in the past, with due regard for a minimum number of actual meetings of the Board of Directors and its committees.

The above-mentioned amounts, set in 2011 and adjusted in 2013, are based on benchmarking using surveys conducted by independent third parties with regard to listed and other companies and resulted in the following remunerations:

★ € 87 250 as fixed remuneration for the chairmanship of the Board of Directors;

★ € 30 000 as fixed remuneration for attendance by the Chief Executive Officers of the meetings of the Board of Directors;

★ € 32 500 for the actual attendance of the other directors of six or more meetings of the Board of Directors; the remuneration will be reduced proportionately if fewer meetings are attended;

★ € 3 000 for attendance of a meeting of the Audit Committee or the Nomination and Remuneration Committee;

★ € 3 750 as additional fixed remuneration for the chairman of the Audit Committee and of the Nomination and Remuneration Committee.

The Board of Directors determines the remuneration as well as the remuneration policy of the Executive Management based on the proposal of the Nomination and Remuneration Committee, with due consideration for the relevant contractual stipulations and benchmark data from other comparable listed companies to ensure that these remunerations are in line with market rates, bearing in mind the duties, responsibilities and management targets.

The management targets to which the variable remunera-tion is linked are proposed annually by the Nomination and Remuneration Committee and approved by the Board of Directors. The Board of Directors evaluates the attainment of these quantitative and qualitative targets annually on the basis of an analysis by the Nomination and Remuneration Committee.

The achievement of the quantitative targets is measured based on the improvement of the financial results com-pared to the previous fiscal year, with due consideration for the changes in the critical parameters for value creation in the existing businesses and the achievement of business plans in expansion projects. The qualitative targets to be attained over more than one year will be evaluated on an annual basis against progress towards each specific target.

From the left: Eddy Duquenne, CEO, Philip Ghekiere, Chairman of the Board of Directors and Joost Bert, CEO


On the proposal of the Board of Directors, which is of the opinion that the quantitative and qualitative management targets are set to also favour the long-term goals of the Company, on 11 May 2016 the General Meeting approved the proposal to base the integral annual variable remunera-tion of the CEOs for the fiscal years 2017 through 2020 on objective and measurable performance indicators agreed in advance and always measured over a period of one year, in accordance with Article 520 ter of the Companies Code.

Application of the remuneration policy on the members of the Board of Directors In line with the remuneration policy and its underlying principles, the non-executive directors of the Company were remunerated for their services in the past fiscal year as shown in the following table. All amounts are gross amounts before deduction of tax.

Exceptionally, the General Meeting of 11 May 2016 offered the possibility of granting 45 000 share options under the 2016 Share Option Plan to the Chairman of the Board of Directors, who is a non-executive director but, as the representative of the majority shareholder, is closely involved in implementing the Company’s long-term value creation strategy. In fulfil-ment of the above mentioned decision 45 000 share options were offered to the Chairman in 2016, who has accepted these in 2017.

With the exception of the aforementioned remuneration, in the year under review the non-executive directors received no other remuneration, benefits, share-based or other incentive bonuses from the Company.

All members of the Board of Directors as well as directors of the subsidiaries of the Company are also covered by a ‘civil liability of directors’ policy, of which the total premium amounts to € 22 123, including taxes, and which is paid by the company.

NAME TITLE REMUNERATION 2016 (IN €)

Mr. Philip Ghekiere (1) (2) Chairman of the Board of Directors and of the Nomination and Remuneration Committee 100 000

Mr. Eddy Duquenne CEO 30 000

Mr. Joost Bert (2) CEO 30 000

Ms. Marion Debruyne, permanent representative of Marion Debruyne bvba Independent Director 32 500

Ms. Annelies van Zutphen, permanent representative of Zutphen Consulting bv (3) Independent Director 32 500

Mr. Rafaël Decaluwé, permanent representative of Gobes Comm. V Independent Director 53 500

Mr. Jo Van Biesbroeck, permanent representative of JoVB bvba Independent Director 41 500

Mr. Geert Vanderstappen, permanent representative of Pallanza Invest bvba (4) Independent Director 45 250

Ms. Adrienne Axler (since 11 May 2016) Independent Director 21 668

TOTAL 386 918

REMUNERATION BOARD OF DIRECTORS

(1) Non-executive director(2) Represent the majority shareholders (3) After the resignation of Ms. Annelies van Zutphen, Van Zutphen Consulting bv was coopted by the Board of Directors as of 23 March 2016,

which was confirmed by the General Meeting of 11 May 2016.(4) Management Center Molenberg bvba was acquired by Pallanza Invest bvba on 19 July 2016.


Application of the remuneration policy on the members of Executive Management

PrinciplesThe remuneration for Executive Management is set on the proposal of the Nomination and Remuneration Committee, with due consideration for the benchmark data from external surveys and with regard to the ratio of the fixed to the variable part of the remuneration package and to keep the remuneration in line with the practice at comparable listed companies as well as market rates, bearing in mind the roles, responsibilities, management targets and value created.

The remuneration for the Executive Management was accordingly set in 2015 for the fiscal years 2015-2016.

In setting the targets for the fiscal year 2016, the Board of Directors used the current EBITDA parameter to set the quantitative management targets as it feels that this is the relevant measure of the development of value creation within the company. When assessing whether they have been achieved, account is taken of how the current EBITDA of the mature cinema complexes (those that have been part of the Kinepolis group for more than three years) has changed compared to the targets set by the Board of Directors as well as how the expansion projects have advanced compared to the business plans.

The qualitative targets relate to the further growth and development of the company, the further development of the Talent Factory, the strengthening of the ICT organization and the further optimization of management reporting and corporate processes and models.

All targets were established to ensure that they help attain not only the short-term goals but also the long-term goals of the Group.

These targets will be evaluated at the beginning of the fiscal year 2017 and if they have been attained the variable remuneration with regard to the performances in the fiscal year under review will be paid out.

ApplicationIn 2016 the Board of Directors evaluated the targets set for fiscal year 2015 and observed that, with regard to the qualitative targets, the milestones had been achieved or at least concrete progress was made and that, with regard to the quantitative targets, the goals were largely exceeded.

On the recommendation of the Nomination and Remuneration Committee, the Board therefore decided to award the full variable remuneration linked to qualitative targets and quantitative targets. Bearing in mind the exceptional results, the considerable expansion efforts and the successful integration of the acquired cinemas, it was also decided to award an exceptional bonus of € 60 000 to Mr Duquenne.

Furthermore, it was observed that the condition of the award of the remaining balance of the 2014 outperfor-mance bonus being, the achievement of the underlying business cases for the acquired complexes in Madrid and Alicante and for the WolffGroup, had been met, so this balance of € 65 000 was paid out in 2016.

Finally, it can be noted that, pursuant to contractual agreements reached prior to 1 July 2009, in the event of the early termination of the contract of one of the members of the Executive Management and if there is a change in the control of the Company, the exit package can be 24 months’ fixed remuneration plus the pro-rata part of the variable remuneration for the ongoing year.


Hereafter follows a summary of the fixed part of the remuneration, the other components of the remuneration (such as pension contributions and insurances) and the variable part, as paid out in 2016 (excluding VAT):

★ bvba Eddy Duquenne- Fixed remuneration (1) € 538 242- Variable remuneration (2) € 400 000 - Balance of 2014 outperformance bonus € 65 000- Exceptional bonus € 60 000 - Expense allowance € 9000TOTAL € 1 072 242

★ Mr. Joost Bert- Fixed remuneration (1) € 350 120- Variable remuneration (2) € 220 000- Pension scheme (3) € 9 723TOTAL € 579 843

Long-term incentives Under the 2007-2016 Share Option Plan the remaining 111 875 allocated options were exercised in full by manage-ment staff, which means this plan came to an end in 2016.

On 11 May 2016 the General Meeting approved a new Share Option Plan, under which 543 304 options (maturing on 10 May 2024) on existing shares can be offered to the Chairman of the Board of Directors, the Executive Management and eligible management staff of the Company or its subsidiaries in order to enable the aforementioned persons to participate in the long-term shareholder value they will help create and so bring their interests into line with the interests of the shareholders. In granting the share options the Company’s goal is to be able to attract, motivate and in the long term retain the best management talent in the company.

A further description of the characteristics of these options is provided in note 19 to the Consolidated Financial Statements.

Fiscal years 2017-2018The Company has no plans for fundamental policy changes for the aforementioned fiscal year.

(1) Other than remuneration received as a member of the Board of Directors (which amounts to € 30 000 for each director) (2) Received in 2016 for performances in 2015(3) Mr Joost Bert participates in a supplementary pension scheme providing for an annual indexed fixed contribution


DESCRIPTION OF THE MAIN CHARACTERISTICS OF THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM Kinepolis Group uses the Integrated Framework for Enterprise Risk Management as developed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). This framework integrates internal control and risk management processes with the purpose of identifying and managing strategic, operational and reporting risks as well as complying and regulatory risks as to enable the achievement of the corporate objectives.

Kinepolis Group uses this framework to implement a system of Risk Management or to control the above risks in the business processes and financial reporting. The system is developed centrally and is as much as possible uniformly applied in the various parts of the organization and subsidiar-ies. The system fills in the various components, as prescribed by the reference model, as well as the various roles and responsibilities with regard to internal controls and risk control.

Roles and ResponsibilitiesWithin Kinepolis Group, risk management is not the exclusive responsibility of the Board of Directors and Executive Management; every employee is responsible for the proper and timely application of the various risk management activities within the scope of his or her job.

The responsibilities regarding risk management of the Board of Directors (and its various committees) and the Executive Management are established and described in detail in legal stipulations, the Belgian Corporate Governance Code 2009 and the Kinepolis Corporate Governance Charter. In brief, it can be stated that the Executive Management bears final responsibility for the appropriate implementation and management of the risk management system, whereas the Board of Directors has a supervisory role in this matter.

The implementation and management of the risk manage-ment system is based on a pyramidal responsibility structure in which each manager is responsible not only for the proper introduction and application of the risk manage-ment processes within the scope of his or her job but also has a duty to monitor its proper implementation by his or her direct reports (who may in turn be managers).

In this way, management can be confident of proper and comprehensive risk management throughout the Company and have peace of mind that related risks in the various business processes and departments are tackled in an integrated way.

Application of the various componentsThe way in which the Company applies the various compo-nents of the COSO framework is outlined below. This description covers only the most important elements and is therefore not comprehensive. In addition, the appro-priateness of the application is regularly evaluated and so permanently subject to change.

Internal Control EnvironmentAn appropriate internal environment is a precondition of being able to effectively apply other risk management components. With this in mind, Kinepolis Group values integrity and ethical action highly. Alongside the existing legal framework, Kinepolis Group endeavors to encourage and enforce this type of behavior through preventive measures (such as Code of Conduct, work regulations, various policies and procedures) and detection mea-sures (such as the reporting procedure and compliance inspections).

Another important aspect of the internal environment is the organizational structure. Kinepolis has a clear and uniform organizational structure, which fits with the various countries and business processes. The organizational

Kinepolis Nevada (Granada, ES)

03 / MANAGEMENT REPORT48 KINEPOLIS GROUP ANNUAL REPORT 201603 / MANAGEMENT REPORT

structure, the determination of the various objectives, management of the budget and the remuneration process are also aligned to each other.

In addition, correct employee training and guidance is essential to the proper application of risk management. To this end, the training needs of every employee are examined on an annual basis, distinct from the existing compulsory courses for certain jobs. An introductory risk management course is also given to new managers, on an annual basis.

Objective settingBusiness objectives are established over various durations in line with the Kinepolis mission. As described in the Corporate Governance Charter, these are confirmed on an annual basis by the Board of Directors, which also ensures they are in line with the Company’s risk appetite.

The (financial and non-financial) objectives established at consolidated level are gradually developed into specific objectives for individual countries, business units and departments on an annual basis. The lowest level is the determination of the individual objectives for each employee. The attainment of these objectives is linked to the remunera-tion policy.

Progress with regard to these objectives is regularly assessed through business controlling activities based on management reports. The individual objectives are assessed at least once every year as part of a formal HR evaluation process.

Internal ControlInternal Control is defined as the identification and assess-ment of business risks as well as the selection, implementa-tion and management of the appropriate risk responses (including the various internal control activities).

As stated above, it is first and foremost the duty of every manager to properly set up and implement the various internal risk management activities (including monitoring) within the scope of his or her job. In other words, each line manager is responsible for the appropriate and timely identification and evaluation of business risks and the ensuing control measures to be taken and managed. Although the individual line manager has some latitude when applying these rules, Kinepolis endeavors to standard-ize the process as much as possible. This is achieved by organizing corporate ERM trainings, implementing the structured policy guidelines and procedures, and using standard lists of internal audits to be conducted.

The Board of Directors and the Management of Kinepolis conduct an annual risk assessment to acquire a general understanding of the business risk profile. The acceptability of residual risks is also assessed as part of this. If these are not acceptable, additional risk response measures are taken.

Information and CommunicationThe appropriate structures, consultation bodies, reporting and communication channels have been set up within Kinepolis Group for business operations in general and risk management in particular to ensure that the information

03 / MANAGEMENT REPORT 49KINEPOLIS GROUP ANNUAL REPORT 2016 03 / MANAGEMENT REPORT

required for those operations, including risk management, is made available to the appropriate persons in a timely and proper way. The information in question is retrieved from data warehouse systems that are set up and main-tained in such a way as to meet the reporting and communication requirements.

MonitoringIn addition to the monitoring activities by the Board of Directors (including the Audit Committee) as stipulated in legal provisions, the Corporate Governance Code 2009 and the Corporate Governance Charter, Kinepolis primarily relies on the following monitoring activities:

★ Business Controlling: The Management, supported by the Business Controlling department, analyzes the progress made towards the targets and explains the discrepancies on a monthly basis. This analysis may identify potential improvements that could be made to the existing risk management activities and measures;

★ Internal Audit: The existing risk management activities and measures are evaluated and compared with internal rules and best practices on a regular basis by the Internal Audit department. Potential improvements are discussed with Management and lead to the implementation of action points that further enhance risk management.

DESCRIPTION OF THE MAIN BUSINESS RISKSOn an annual basis, the Board of Directors and the Management conduct a risk assessment to gain insight into the main business risks, which assessment is subsequently analyzed and approved by the Board of Directors. As in previous years, in 2016 this again occurred on the basis of a written survey of the participants to gain both quantita-tive and qualitative results, enabling risks to be assessed in order of scale. Although this way of working enables Kinepolis to distinguish important risks from less important risks in a well-founded way, it remains an estimation that,

inherent to the definition of risk, provides no guarantee whatsoever of the actual occurrence of risk events. The following list (in random order) therefore contains only some of the risks to which Kinepolis is exposed.

Availability and quality of supplied material Bearing in mind that Kinepolis Group NV does not produce any material itself (such as movies), it is dependent on the availability, diversity and quality of movies as well as the possibility of being able to rent this material from distribu-tors. Kinepolis Group NV endeavors to protect itself wherever possible by maintaining good long-term relations with the major distributors or producers, by pursuing to some extent a content diversification policy and by playing a role as distributor in Belgium. The investments in Tax Shelter projects should also be viewed in this light.

Seasonal effectsThe operating revenues of Kinepolis Group can vary from period to period, because the producers and distributors decide when their movies are released completely independently of the cinema operators and because certain periods, such as holidays, can traditionally have an impact on visitor numbers. The weather can also play an important role in the frequency of cinema visits. Kinepolis largely accepts this risk, considering that the costs of a financial hedging policy would exceed the revenue from it, but endeavors to mitigate the consequences among other things by variabilizing its cost structure to a maximum degree.

CompetitionKinepolis Group’s position as a cinema operator is subject to competition just like every other product or service for which substitution exists. Kinepolis Group’s position is impacted by increasing competition from other leisure activities, such as concerts and sporting events, which can influence the behavior of Kinepolis customers. This competition also comes from the cinemas of other


operators – both existing and prospective – in the markets where the Group is active and from the increasing distribu-tion and availability of films through non-cinema channels, such as video-on-demand, pay-per-view and internet. This development can also be influenced by the shortening of the period ordinarily observed by the distributors, between the first screening of a movie in the cinema and its availability through other channels, as well as the constant technical improvement in the quality of these alternative ways of watching movies. Besides these legal alternatives, the cinema industry also has to deal with illegal downloads. Kinepolis is working actively with distributors to agree measures to counter any increasing illegal sharing of material online.

Kinepolis strives to strengthen its competitive position as a cinema operator by implementing its strategic vision, which is focused on being able to provide customers with a premium service and film experience.

Economic situationChanges to the general, global or regional economic situation or the economic situation in areas where Kinepolis Group NV is active and that can impact consumer behavior and the production of new movies, can have a negative impact on Kinepolis Group’s operating profits. Kinepolis endeavors to arm itself against this threat by being rigorously efficient and closely monitoring and controlling costs and margins. Changing economic condi-tions can also increase competitive risks.

Risks arising from growth opportunitiesIn the event of further growth, competition authorities can impose additional conditions and restrictions with regard to the growth of Kinepolis Group (see also ‘Political,

regulatory and competition risks’ below). Certain inherent risks are also associated with growth opportunities, either through acquisition or new-build projects, that can have a negative impact on the goals set. With this in mind, Kinepolis Group will thoroughly examine growth opportu-nities in advance, to ensure these risks are properly assessed and, where necessary, controlled.

Political, regulatory and competition risksKinepolis Group strives to operate within the legal frame-work at all times. However, additional or amended legislation, including tax laws, could restrict Kinepolis’ growth and operations or result in additional investments or costs. Where possible, Kinepolis Group actively manages these risks by notifying the relevant political, administra-tive or legal bodies of its positions and defending them in an appropriate way. Belgium’s Competition Council has imposed a number of conditions and restrictions on Kinepolis Group, such as the requirement for a prior approval of plans to build new cinema complexes or acquire existing cinema complexes in Belgium if these do not entail the rundown of existing complexes.

Technological risksCinema has become a highly computerized and automated sector in which the correct technological choices and optimal functioning of projection systems and other ICT systems are critical to be able to offer customers optimal service. Kinepolis Group manages these risks by closely following the latest technological developments, regularly analyzing system architecture and, where necessary, optimizing and implementing best ICT practices.

Kinepolis B2B event


Employee risksAs a service company, Kinepolis Group largely depends on its employees to provide high-quality service. Hiring and retaining the right managers and employees with the requisite knowledge and experience in all parts of the Company is therefore a constant challenge. Kinepolis accepts this challenge by offering attractive terms of employment, good knowledge management and a pleasant working atmosphere. Kinepolis measures employee satisfaction on the basis of employee surveys and where necessary improves its policies.

Risks arising from exceptional events Events of an exceptional nature, including but not limited to extreme weather, political unrest and terrorist attacks, in a country where Kinepolis Group is active and that result in material damage to one of the multiplexes, a fall in the number of customers or disruption in the delivery of products can have a negative impact on activities. Kinepolis strives to minimize the potential impact of such risks through a combination of preventive (such as construction decisions, evacuation planning) and detection measures (such as fire detection systems) and by taking out proper insurance.

Environmental liability and property risksThe property that Kinepolis Group owns and leases is subject to regulations with regard to environmental liability and potential property risks. In addition to the above mentioned measures to control political and regulatory risks, Kinepolis will take appropriate measures to prevent environmental damage and limit property risks.

Other risksAfter the acquisition by KP Immo Brussel NV (a subsidiary of Kinepolis Group NV) of the premises in Galerie Toison d’Or (Guldenvlieslaan/Avenue de la Toison d’Or 8) in Brussels (Belgium), which are leased to the cinema operator UGC Belgium, Kinepolis Group NV and its subsidiary were served with a summons by the aforementioned tenant before the Commercial Court in Brussels to declare the aforementioned transaction null and void due to alleged breaches of the Economic Law Book and one of the conditions imposed on Kinepolis Group by the Belgian Competition Authority in 1997. UGC Belgium also filed a complaint with this Competition Authority at year-end 2014. The Commercial Court ruled in favor of Kinepolis at the end of 2016, with UCG Belgium then lodging an appeal at the Court of Appeal in Brussels.

The other risks stated in 2015 (the Luxembourg competition case and the lack of an operating license for an acquired cinema) were also resolved successfully in 2016.

Lastly, it can be reported that Kinepolis is currently involved in proceedings relating to a tax ruling applied to it in 2012. On 11 January 2016 the European Commission published its decision that the Belgian tax rulings with regard to excess profit are considered to be unlawful state aid. The decision of the European Commission obliges the Belgian government to make an additional claim for tax that would have been owed if such tax rulings had not been applied. As a consequence of the decision of the European Commission, in accordance with IAS 12 Kinepolis has set up a provision of € 9.4 million for a

Kinepolis Enschede (NL)

03 / MANAGEMENT REPORT52 KINEPOLIS GROUP ANNUAL REPORT 201603 / MANAGEMENT REPORT

potential additional claim for tax on the excess profit that was not included in the taxable base due to the ruling. The amount of the provision covers the full potential claim, including interest charges.

Together with other companies involved, Kinepolis filed an appeal against the European Commission’s decision at the Court of Justice of the European Union on 1 July 2016. If the appeal lodged by Kinepolis Group is successful Kinepolis will be refunded all amounts paid. The final judgment of the Court of Justice of the European Union is not expected for a couple of years.

Kinepolis is confident that these proceedings will end satisfactorily.

USE OF FINANCIAL INSTRUMENTSKinepolis Group is exposed to a number of financial risks in its daily operations, such as interest risk, currency risk, credit risk and liquidity risk.

Derivative financial products concluded with third parties can be used to manage these financial risks. The use of derivative financial products is subject to strict internal controls and rules. It is Group policy not to undertake any trading positions in derivative financial instruments.

Kinepolis manages its debts by combining short-, medium- and long-term borrowings. The mix of debts with fixed and floating interest rates is established at Group level. At the end of December 2016 the Group’s net financial debt was €169.8 million. Interest rate swaps were entered into for € 41.6 million in order to hedge the interest risk on a fixed-term loan that was originally for the same amount.

The Notes to the Consolidated Financial Statements provide a detailed description of how the Group manages the aforementioned risks.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODEKinepolis Group NV complies with the principles of the Belgian Corporate Governance Code.

In line with the ‘comply or explain principle’, the Company has decided that it was in the best interests of the Company and its shareholders to depart from the stipulations of the Code in a limited number of specific cases in addition to the circumstances described above:

★ Contrary to Stipulation 5.5. of the Code, the Board of Directors believes that an Audit Committee comprising two independent members – both with the requisite auditing and accounting expertise – provides sufficient guarantees with regard to the efficient functioning of the committee;

★ Contrary to Stipulation 7.7. of the Code, after approval by the General meeting of 11 May 2016, in 2016 45 000 share options under the Share Option Plan were offered to the Chairman of the Board of Directors, who accepted them in 2017. The allocation of options fits within the framework of this authorization, given that the Chairman, as a representative of the majority share-holder, is closely involved in implementing the Company’s long-term value creation strategy.

★ Contrary to Stipulation 4.6. of the Code, the professional qualifications and duties of the directors to be reap-pointed were not stipulated in the convening notices to the General Shareholders’ Meeting of 11 May 2016, given that these qualifications are already published in several press releases and annual reports.

Kinepolis Jaarbeurs (Utrecht, NL) opening

03 / MANAGEMENT REPORT 53KINEPOLIS GROUP ANNUAL REPORT 2016 03 / MANAGEMENT REPORT

RESEARCH AND DEVELOPMENTIn the year under review, Kinepolis developed a number of new concepts for the benefit of the operating entities within the framework of the three strategic pillars. Kinepolis is committed to constantly adapting the experi-ence it provides to the changing demographic trends, to be innovative with regard to picture and sound and other factors, in order to improve the experience of the custom-ers and protect the profitability of the group.

As part of this, the Kinepolis Innovation Lab was set up in 2016 with the aim of generating much more bottom-up innovation from the operating entities rather than the top-down sort. Examples of concepts developed in 2016 are the Sushicque concept in Spain (sushi bar operated by Kinepolis), the Cinetray concept in Belgium and the mobile Nacho island in Spain. Efforts are currently being invested in the Ciné K concept in France, which focuses on more local and alternative movies, and the continued rollout of Cosy Seating. The Belgian e-shop, which sells gift boxes, was launched in France and the new Kinepolis app was released in all countries in February 2017.

CONFLICT OF INTERESTS POLICYThe Board of Directors took the following decisions on 23 March 2016, pursuant to Article 523 of the Companies Code.

★ Evaluation of the 2015 management targets for Executive Management

★ Award the resulting variable remuneration of €400 000 to Mr Eddy Duquenne and € 220 000 to Mr Joost Bert, as well as a discretionary bonus of € 60 000 to Mr Eddy Duquenne due to the exceptional results and the considerable efforts made to implement the expansion strategy and the successful integration of the acquired cinemas in Spain and the Netherlands;

★ Award to Mr Eddy Duquenne of the balance of the outperformance bonus for the fiscal year 2014 of € 65 000 after the attainment of the targets for the acquired complexes in Madrid and Alicante and the complexes that are part of the Wolff Group;

★ Establishment of the management targets for fiscal year 2016;

★ Allocation of 90 000 share options to Mr Duquenne and 45 000 share options to Mr Joost Bert and Mr Philippe Ghekiere respectively, subject to the approval of the 2016 Share Option Plan by the General Meeting of 11 May 2016.

The relevant excerpts from the minutes were included in the Report on the Unconsolidated Financial Statements.

PROFIT APPROPRIATION AND DIVIDEND PAYMENTIn its proposal to the General Shareholders’ Meeting concerning the appropriation of profit and payment of dividend the Board of Directors took various factors into consideration, including the Company’s financial situation, operating profits, current and expected cash flows and expansion plans.

The payment of a gross amount of € 0.87 (1) per share for fiscal year 2016 is proposed, based on a pay-out ratio of 50% of net profit. Subject to the approval of the General Meeting, the Board of Directors decided to make the dividend available to shareholders through a financial institution of their choice on 16 May 2017 (ex-date: 12 May 2017; record date: 15 May 2017) at a financial institution of the shareholder’s choosing.

Other information

Cosy Seating

(1) Based on the number of dividend eligible shares on 17/02/2017.


Undersigned certify that, to their knowledge,

★ The consolidated financial statements which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the equity, financial position and financial performance of the company, and the entities included in the consolidation as a whole;

★ The management report on the consolidated financial statements includes a fair overview of the development and performance of the business and the position of the company, and the entities included in the consolidation, together with a description of the principal risks and uncertainties which they are exposed to.

Declaration with regard to the information containedin this annual report

Eddy Duquenne CEO Kinepolis Group

Joost Bert and Eddy Duquenne, CEOs Kinepolis Group

Joost Bert CEO Kinepolis Group

20 March 2017


Share information

04 / SHARE INFORMATION56 KINEPOLIS GROUP ANNUAL REPORT 2016

04 / SHARE INFORMATION 57KINEPOLIS GROUP ANNUAL REPORT 2016

The Kinepolis Group share

2012 2013 2014 2015 2016

Number of shares at 31 December 5 856 508 5 582 654 27 365 197 27 365 197 27 365 197

Weighted average number of ordinary shares (1) 5 800 963 5 431 812 26 288 260 26 782 831 27 214 153

Weighted average number of diluted shares (2) 5 966 251 5 628 307 27 341 842 27 138 627 27 249 350

2012 2013 2014 2015 2016

Closing price at 31 December (in €) (3) 81.99 115.1 33.46 41.40 42.50

Market value at closing price (in ’000 €) 480 175 642 563 915 639 1 132 919 1 163 021

Lowest price of the year (in €) (3) 10.8 16.0 22.9 32.9 35.2

Highest price of the year (in €) (3) 16.7 23.5 34.3 41.6 42.7

Traded year volume 2 174 524 1 366 053 4 719 540(3) 7 590 604 3 484 211

Average traded day volume (3) 8 494 5 357 18 430(3) 29 651 13 557

(1) Weighted average number of ordinary shares: average number of outstanding shares – average number of treasury shares (2) Weighted average number of diluted shares: average of number of outstanding shares – average number treasury shares + number of possible new shares that must be issued under the

existing share option plans x dilution effect of the share option plans. (3) On 1 July 2014 each Kinepolis share was split into five new shares. 2012, 2013 and the first six months of 2014 were recalculated in that sense.

Source: Euronext.com

NUMBER OF SHARES

SHARE TRADING

Kinepolis Dordrecht (NL)

58 04 / SHARE INFORMATION KINEPOLIS GROUP ANNUAL REPORT 2016

The Kinepolis Group share (ISIN: BE0974274061 / mnemo: KIN) has been listed since 9 April 1998 on NYSE Euronext Brussels, under compartment A, Large Caps and is on the VLAM21 index, the IN.flanders index and the BEL Family index.

SHARE PRICE AND VOLUME OVER LAST TEN YEARS (4)

SHARE PRICE COMPARISON BETWEEN KINEPOLIS AND PEERS OVER THE PAST FIVE YEARS

(4) As a consequence of the share split on 1 July 2014, the historical share price has been recalculated (price divided by five).

04 / SHARE INFORMATION

Kinepolis GroupCineworld GroupCineplexCinemark Hld.REGAL Entertainment GroupAMC Entertainment Group

59KINEPOLIS GROUP ANNUAL REPORT 2016

Financial Report

60 05 / FINANCIAL REPORT KINEPOLIS GROUP ANNUAL REPORT 2016

6105 / FINANCIAL REPORTKINEPOLIS GROUP ANNUAL REPORT 2016

Consolidated income statementat 31 December

IN ’000 € NOTE 2015 2016

Revenue 3 301 571 324 938

Cost of sales -201 993 -224 729

Gross profit 99 578 100 209

Marketing and selling expenses -17 538 -18 620

Administrative expenses -17 716 -19 059

Other operating income 4 1 177 981

Other operating expenses 4 -256 -304

Operating profit 65 245 63 207

Finance income 7 1 140 866

Finance expenses 7 -8 894 -8 485

Profit before tax 57 491 55 588

Belgian Excess Profit Ruling (EPR) tax 8 -9 355

Income tax expenses 8 -15 881 -16 622

Total income tax expenses -25 236 -16 622

Profit for the period from continuing operations 32 255 38 966

Profit from discontinued operations, net of tax 10 8 680

PROFIT FOR THE PERIOD 32 255 47 646

Attributable to:

Owners of the Company 32 255 47 646

PROFIT FOR THE PERIOD 32 255 47 646

Basic earnings per share from continuing operations (€) 1.20 1.43

Basic earnings per share from discontinued operations (€) 0.32

Basic earnings per share (€) 18 1.20 1.75

Diluted earnings per share from continuing operations (€) 1.19 1.43

Diluted earnings per share from discontinued operations (€) 0.32

Diluted earnings per share (€) 18 1.19 1.75

The notes on page 68-127 are fully part of these consolidated financial statements.


Consolidated statement of profit or loss and other comprehensive income

at 31 December

IN ’000 € NOTE 2015 2016

Profit for the period 32 255 47 646

Realized results 32 255 47 646

Items that are or may be reclassified to profit or loss:

Translation differences 884 -277

Cash flow hedges – effective portion of changes in fair value 64 -334

Cash flow hedges – net change in the fair value reclassified to profit or loss -29 -63

Taxes on other comprehensive income -12 319

907 -355

Items that will not be reclassified to profit or loss:

Changes to estimates of defined benefit plans 5 -541

-541

Other comprehensive income for the period, net of tax 907 -896

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 33 162 46 750

Attributable to:

Owners of the Company 33 162 46 750

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 33 162 46 750



Consolidated statement of financial positionat 31 December

IN ’000 € NOTE 2015 2016

Intangible assets 9 5 111 5 900

Goodwill 10 53 256 53 255

Property, plant and equipment 11 289 201 321 457

Investment property 12 31 965 31 007

Deferred tax assets 13 670 902

Other receivables 15 11 845 11 574

Other financial assets 27 27

Non-current assets 392 075 424 122

Inventories 14 4 694 5 292

Trade receivables and other assets 15 32 992 29 370

Current tax assets 442 418

Cash and cash equivalents 16 60 432 44 244

Derivative financial instruments 64

Current assets 98 624 79 324

TOTAL ASSETS 490 699 503 446

ASSETS

IN ’000 € NOTE 2015 2016

Share capital 17 18 952 18 952

Share premium 17 1 154 1 154

Consolidated reserves 103 721 130 863

Translation reserve -794 -1 071

Total equity attributable to owners of the Company 123 033 149 898

Equity 123 033 149 898

Loans and borrowings 20 214 000 207 278

Provisions for employee benefits 5 544

Provisions 21 7 161 6 664

Deferred tax liabilities 13 19 868 18 324

Derivative financial instruments 333

Other payables 22 10 124 9 174

Non-current liabilities 251 153 242 317

Bank overdrafts 16 44 34

Loans and borrowings 20 8 714 6 996

Trade and other payables 22 86 966 90 653

Provisions 21 753 1 366

Current tax liabilities 23 20 036 12 182

Current liabilities 116 513 111 231

TOTAL EQUITY AND LIABILITIES 490 699 503 446

EQUITY AND LIABILITIES



Consolidated statement of cash flowat 31 December

IN ’000 € NOTE 2015 2016


Adjustment for:

Depreciation and amortization 6 23 572 27 621

Provisions and impairments -260 269

Government grants 4 -791 -1 031

(Gains) Losses on sale of fixed assets 4 201 102Change in fair value of derivative financial instruments and unrealized foreign exchange results 164

Unwinding of non-current receivables 7, 21 -609 -584

Share-based payments 5 259 84

Amortization of refinancing transaction costs 287 320

Interest expenses and income 7 6 703 6 813

Change in inventory -853 -598

Changes in trade receivables and other assets -2 949 4 333

Change in trade and other payables 10 036 3 053

Cash from operating activities 93 251 95 971

Income taxes paid -16 059 -26 764

Net cash from operating activities 77 192 69 207

Acquisition of intangible assets 9 -1 976 -1 760

Acquisition of property, plant and equipment and investment property 11, 12 -51 646 -58 047

Acquisition of subsidiaries, net of acquired cash 10 -40 190 -24 740

Proceeds from sale of intangible and tangible assets 179 310

Proceeds from sale of subsidiary 10 34 990

Net cash used in investing activities -93 633 -49 247

Capital reduction -2

New loans and borrowings 136 808

Repayment of loans and borrowings -55 378 -8 714

Payment of transaction costs with regard to refinancing obligations -1 629 -45

Interest paid -4 495 -7 473

Interest received 66 59

Repurchase and sale of own shares 7 881 1 514

Dividends paid -23 009 -21 480

Net cash – used in / + from financing activities 60 242 -36 139

+INCREASE/ -DECREASE IN CASH AND CASH EQUIVALENTS 43 801 -16 179

Cash and cash equivalents at beginning of the period 16 16 530 60 388

Cash and cash equivalents at end of the period 16 60 388 44 210

Effect of movements in exchange rates on cash and cash equivalents 57 1

+INCREASE/ -DECREASE IN CASH AND CASH EQUIVALENTS 43 801 -16 179



IN ’000 € 2016

ATTRIBUTABLE TO OWNERS OF THE COMPANYEQUITY

SHARE CAPITAL AND SHARE PREMIUMS

TRANSLATION RESERVE

HEDGING RESERVE

TREASURY SHARES

RESERVE

SHARE-BASED PAYMENTS RESERVE

RETAINED EARNINGS

AT 31 DECEMBER 2015 20 106 -794 40 -4 439 247 107 873 123 033

Profit for the period 47 646 47 646Items that are or may be reclassified to profit or loss:Translation reserve -277 -277Cash flow hedges – effective portion of changes in fair value -334 -334


Taxes on other comprehensive income 319 319

-277 -78 -355Items that will not be reclassified to profit or loss:Changes to estimates of defined benefit plans -541 -541

-541 -541Other comprehensive income for the period, net of tax -277 -78 -541 -896

Total comprehensive income -277 -78 47 105 46 750

Dividends -21 484 -21 484

Own shares acquired / sold 712 802 1 514

Share-based payment transactions -247 332 85Total transactions with owners, recorded directly in equity 712 -247 -20 350 -19 885

AT 31 DECEMBER 2016 20 106 -1 071 -38 -3 727 134 628 149 898

Consolidated statement of changes in equity at 31 December



IN ’000 € 2015

ATTRIBUTABLE TO OWNERS OF THE COMPANYEQUITY

SHARE CAPITAL AND SHARE PREMIUM

TRANSLATION RESERVE

HEDGING RESERVE

TREASURY SHARE

RESERVE

SHARE-BASED PAYMENTS RESERVE

RETAINED EARNINGS

AT 31 DECEMBER 2014 20 106 -1 678 17 -10 572 2 911 93 948 104 732

Profit for the period 32 255 32 255Items that are or may be reclassified to profit or loss:Translation reserve 884 884Cash flow hedges – effective portion of changes in fair value 64 64


Taxes on other comprehensive income -12 -12Other comprehensive income for the period, net of tax 884 23 907

Total comprehensive income 884 23 32 255 33 162

Dividends -23 102 -23 102

Own shares acquired / sold 6 133 1 849 7 982

Share-based payment transactions -2 664 2 923 259Total transactions with owners, recorded directly in equity 6 133 -2 664 -18 330 -14 861

AT 31 DECEMBER 2015 20 106 -794 40 -4 439 247 107 873 123 033



Notes to the consolidated financial statements

1. Significant accounting policies 692. Segment reporting 823. Revenue 884. Other operating income and expenses 885. Employee benefit expenses 896. Additional information on operating expenses

by nature 917. Finance income and expenses 918. Income tax expenses 929. Intangible assets 9310. Goodwill and business combinations 9311. Property, plant and equipment 9812. Investment property 9913. Deferred tax 10014. Inventories 10115. Trade receivables and other assets 10216. Cash and cash equivalents 10317. Equity 10318. Earnings per share 10419. Share-based payments 10420. Loans and borrowings 10521. Provisions 10622. Trade and other payables 10723. Current tax liabilities 10824. Risk management and financial instruments 10825. Operating leases 11626. Capital commitments 11727. Contingencies 11728. Related parties 11829. Subsequent events 11830. Mandates and remuneration

of the statutory auditor 11931. Group entities 120


1. Significant accounting policies

Kinepolis Group NV (the ‘Company’) is a company estab-lished in Belgium. The consolidated financial statements of the Company for the year ending 31 December 2016 include the Company and its subsidiaries (together the ‘Group’). These consolidated financial statements were approved for publication by the Board of Directors on 20 March 2017.

STATEMENT OF COMPLIANCEThe consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), as published by the International Accounting Standards Board (IASB) and adopted by the European Union until 31 December 2016.

BASIS OF PREPARATIONThe consolidated financial statements are presented in Euro, rounded to the nearest thousand. They were drawn up on a historical cost basis, with the exception of the following assets and liabilities which are recorded at fair value: derivative financial instruments, contingent consider-ations and financial assets available for sale.

Assets classified as held for sale are measured, in accordance with IFRS 5, at the lower of their carrying amount and fair value less costs to sell.

The accounting policies have been applied consistently across the Group. They are consistent with those applied in the previous financial period.

A number of new standards and amendments to existing standards that became applicable to the preparation of the consolidated annual accounts on 1 January 2016 gave no cause to change the Group’s accounting rules and have no material impact on the consolidated financial statements.

The preparation of the financial statements under IFRS requires management to make judgments, estimates and assumptions that influence the application of the policies and the reported amounts of assets and liabilities, income and expenses.

The estimates and related assumptions are based on past experience and on various other factors that are considered reasonable in the given circumstances. The outcomes of these form the basis for the judgment as to the carrying amount of assets and liabilities when this is not evident from other sources. Actual results can differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions of estimates are recognized in the period in which the estimates are revised if the revision affects only this period, or in the revision period and future periods if the revision affects both the reporting period and future periods.

Judgments, estimates and assumptions are made, among other things, when:

★ Determining the useful life of intangible assets and property, plant and equipment, with the exception of goodwill (see related accounting policies);

★ Assessing the necessity of and estimating impairment losses on intangible assets (including goodwill) and property, plant and equipment;

★ Recording and calculating provisions; ★ Assessing the degree to which losses carried forward

will be used in the future; ★ Classifying leases (see notes 11 and 25); ★ Prospectively evaluating the effectiveness of cash flow

hedges (see note 24). ★ Determining the fair value of the contingent

considerations within the framework of business combinations (see notes 10 and 24).

The estimates and assumptions with a significant probability of causing a material adjustment to the value of the assets and liabilities during the next financial period are stated below.

Recoverability of deferred tax assetsDeferred tax assets for unused tax losses will only be recognized if future taxable profits will be available to be able to recover these losses (based on budgets and forecasts).


The actual tax result may differ from the assumption made when the deferred tax was recorded. We refer to note 13 for the relevant assumptions.

Impairment tests for intangible assets, goodwill and property, plant and equipmentThe recoverable amount of the cash generating units is defined as the higher of their value in use or their fair value less costs to sell. These calculations require the use of estimates and assumptions with regard, among other things, to discount rates, exchange rates, future investments and expected operating efficiency. We refer to note 10 for the relevant assumptions.

ProvisionsThe estimates and judgments that most impact the amount of the provisions are the estimated costs and the expected likelihood and timing of the cash outflows. They are based on the most recent available information at the balance sheet date. We refer to note 21 for the relevant assumptions.

Other assumptions and estimates will be discussed in the respective notes where they are used.

BASIS OF CONSOLIDATIONBusiness combinationsBusiness combinations are accounted for using the acquisition when control is transferred to the Group (see Basis of consolidation – Subsidiaries). The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment (see Intangible assets – Goodwill). Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in the income statement.

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay a contingent consideration that meets the definition of a financial

instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognized in the income statement.

If share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards), and if they relate to services provided in the past, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market- based measure of the replacement awards compared with the market- based measure of the acquiree’s awards and the extent to which the replacement awards relate to pre-combination service.

SubsidiariesSubsidiaries are those entities over which the Company exercises control. By control is understood that the Company is exposed to or has rights to variable returns from its involvement in the investee, and has the ability to affect these returns through its power over the investee.

The financial statements of subsidiaries are recognized in the consolidated financial statements from the date that control commences until the date that control ceases.

Losses realized by subsidiaries with non-controlling interests are proportionally allocated to the non-controlling interests in these subsidiaries, even if this means that the non-controlling interests display a negative balance.

If the Group no longer has control over a subsidiary all assets and liabilities of the subsidiary, any non-controlling interests and other equity components with regard to the subsidiary are derecognized and the ensuing gains or losses are recognized in the income statement. Each result with regard to the loss of control will be included in the income statement. Any remaining interest in the former subsidiary will be recognized at fair value on the date of loss of control, after which it will be recognized as an associated company or as a financial asset available for sale, depending on the level of control retained.


Equity accounted investeesEquity accounted investees are entities over which the Group exercises significant influence, but not control or joint control, over the financial and operational policies. Significant influence is deemed to exist when the Group holds between 20 and 50 percent of the voting rights of another entity. Participating interests in equity accounted investees are recorded using the equity method and are initially recognized at cost. The transaction costs are included in the cost price of the investment. The consoli-dated financial statements include the Group’s share in the comprehensive income of the investments, which is recorded following the equity method, from the starting to the ending date of this significant influence. Whenever the Group’s share in the losses exceeds the carrying amount of the investments in equity accounted investees, the carrying amount is reduced to zero and future losses are no longer recognized, except to the extent that the Group has an obligation on behalf of the investees. When there are impairment indicators, the accounting policy concerning impairment losses is applied.

Acquisition of non-controlling interestsThe acquisition of non-controlling interests in a subsidiary does not lead to the recognition of goodwill, because this is deemed to be a share transaction and is recognized directly in equity. The non-controlling interests are adjusted on the basis of the proportional part in the equity of the subsidiary.

Transactions eliminated on consolidation Intra-group balances and transactions, along with any unrealized gains and losses on transactions within the Group or gains or losses from such transactions, are eliminated in the consolidated financial statements. Unrealized gains arising from transactions with equity accounted investees are eliminated proportionally to the Group’s interest in the investee.

Unrealized losses are eliminated in the same way as unrealized gains, but only where there is no indication of impairment.

FOREIGN CURRENCYTransactions in foreign currenciesTransactions in foreign currencies are translated to the relevant functional currency of the Group entities at the exchange rate on the transaction date. Monetary assets and liabilities expressed on the balance sheet date in foreign currencies are translated to Euro at the exchange rate on the balance sheet date. Non-monetary assets and liabilities expressed in foreign currency are translated at the exchange rate on the transaction date. Non-monetary assets and liabilities in foreign currencies recognized at fair value are translated to Euro at the exchange rates on the date on which the fair value was determined. Exchange rate differences occurring in the translation are immediately recognized in the income statement, with the exception of exchange rate differences with regard to equity instruments available for sale.

Financial statements in foreign currenciesAssets and liabilities relating to foreign operations, including goodwill and fair value adjustments on acquisition, are translated to Euro at the exchange rate on the balance sheet date. Income and expenses of foreign entities are translated to Euro at exchange rates approaching the exchange rates prevailing on the transaction dates.

Exchange rate differences arising from translation are recognized immediately in equity.

If the settlement of monetary receivables from and payables to foreign entities is neither planned nor likely in the foreseeable future, exchange rate gains and losses on these monetary items are deemed to be part of the net investment in these foreign entities and recognized in other comprehen-sive income under the translation reserve.

FINANCIAL INSTRUMENTSIssued loans, receivables and deposits, issued debt instru-ments and loans received are initially recognized by the Group on the date they originated. All other financial assets and liabilities are initially recognized on the transaction date. The transaction date is the date on which the contractual provisions of the instrument become binding for the Group.


Non-derivative financial instrumentsNon-derivative financial instruments comprise investments in equity and debt securities, trade receivables and other assets, cash and cash equivalents, loans and borrowings, trade and other payables.

Non-derivative financial instruments are initially recognized at fair value plus (or less for loans and borrowings), for instruments not measured at fair value with changes in value recognized through profit or loss, any directly attributable transaction costs. After initial recognition, non-derivative financial instruments are measured as described below.

Cash and cash equivalentsCash and cash equivalents comprise the cash and deposits withdrawable on demand with a remaining term of no more than three months, whereby the risk of changes in the fair value is negligible. Bank overdrafts that are repayable on demand, which are an integral part of the Group’s cash management are viewed as part of cash and cash equivalents in the presentation of the cash flow statement.

Financial assets available for sale Investments in equity securitiesInvestments in equity securities consist of participating interests in entities over which the Group has no control or no significant influence.

These equity securities are classified as financial assets available for sale and recorded at fair value on initial recognition, except for equity securities not listed on an active market and for which the fair value cannot reliably be determined. Participating interests not eligible for valuation at fair value are recorded at historical cost. Profits and losses resulting from the change in fair value of a participating interest classified as a financial asset available for sale and which is not hedged are taken directly into equity. When the investment is sold, received or otherwise transferred, or when the carrying amount of the investment is impaired, the accumulated profit or loss previously included in equity is transferred to the income statement.

The fair value of financial assets available for sale is their listed bid price on the balance sheet date.

Other non-derivative financial instrumentsOther non-derivative financial instruments are measured at amortized cost using the effective interest rate method less any impairment losses.

Share capitalOrdinary shares are classified as equity. Additional costs which are directly attributable to the issue of ordinary shares and share options are deducted from equity, after deducting any tax effects.

Treasury shares: When share capital classified as equity is reacquired by the Company, the amount paid, including directly attributable costs, is viewed as a change in equity. Purchase of treasury shares is recognized as a deduction from equity. The profit or loss pursuant to the sale or cancellation of treasury shares is directly recognized in equity.

Dividends are recognized as amounts payable in the period in which they are declared.

Derivative financial instrumentsThe Group uses derivative financial instruments to manage the exchange rate and interest risks deriving from opera-tional, financial and investment activities. Under its treasury management policy the Group does not use derivative financial instruments for trading purposes. Derivative financial instruments that do not meet the requirements of hedge accounting are, however, accounted for in the same way as derivatives held for trading purposes.

Derivative financial instruments are initially measured at fair value. Attributable transaction costs are expensed in the income statement as incurred. Subsequent to initial recognition these instruments are measured at fair value. The accounting treatment of the resulting profits or losses depends on the nature of the derivative financial instrument.

The fair value of derivative financial instruments is the estimated amount that the Group will obtain or pay in an orderly transaction on the balance sheet date at the end of the contract in question, with reference to present interest and exchange rates and the creditworthiness of the counterparty.


HedgingCash flow hedgesWhenever derivative financial instruments serve to hedge the variability in cash flows of a liability or a highly probable future transaction, the effective portion of the changes in fair value of these derivatives is recorded directly in equity. When the future transaction results in the recording of a non-finan-cial asset, the cumulative profits or losses are removed from equity and transferred to the carrying amount of the asset. In the other case the cumulative profits or losses are removed from equity and transferred to the income state-ment at the same time as the hedged transaction. The non-effective portion is recognized immediately in the income statement. Profits or losses deriving from changes in the time value of derivatives are not taken into consideration in determining the effectiveness of the hedging transaction and are recognized immediately in the income statement.

At initial designation of a derivative financial instrument as a hedging instrument the Group formally documents the relationship between hedging instrument and hedged item, including its risk management goals and strategy when entering the hedging transaction, the risk to be hedged and the methods used to assess the effectiveness of the hedge relationship. When entering the hedge relationship and subsequently, the Group assesses whether during the period for which the hedge is designated, the hedging instruments are expected to be ‘highly effective’, in offsetting the changes in fair value or cash flows allocated to the hedged positions and whether the actual results of each hedge are within the range of 80 to 125%. A cash flow hedge of an expected transaction requires that it is highly likely that the transaction will occur and that this transaction results in exposure to the variability of cash flows such that this can ultimately impact the reported profit or loss.

Whenever a hedging instrument or hedge relationship is ended, but the hedged transaction still has not taken place, the cumulative gains or losses remain in equity and will be recognized in accordance with the above policies once the transaction takes place.

When the hedged transaction is no longer likely, the cumula-tive gains or losses included in equity are immediately taken into the income statement.

Fair value hedgesHedge accounting is not applied to derivative instruments which are used for fair value hedging of foreign currency denominated monetary assets and liabilities. Changes in the fair value of such derivatives are recognized in the income statement as part of the foreign exchange gains and losses.

PROPERTY, PLANT AND EQUIPMENTOwned assetsItems of property, plant and equipment are measured at cost less accumulated depreciation and impairments (see below). The cost of self-constructed assets includes the cost price of the materials, direct employee benefit expenses and a proportionate share of the production overhead, any costs of dismantling and removal of the asset and the costs of restoring the location where the asset is located. Where parts of an item of property, plant and equipment have different useful lives, these are accounted for as separate property, plant and equipment items.

Gains and losses on the sale of property, plant and equipment are determined by comparing the sales proceeds with the carrying amount of the assets and are recognized within other operating income and expenses in the income statement.

Leased assetsLeases that transfer to the Group nearly all the risks and rewards of ownership of an asset are classified as finance leases. Buildings and equipment acquired under finance leases are recorded at the lower of the fair value or the present value of the minimum lease payments at the beginning of the lease agreement, less cumulative deprecia-tion and impairments. Leased assets are depreciated over the term of the lease or the useful life, whichever is shorter, except if it is reasonably certain that the Group will assume ownership of the leased assets at the end of the lease term.

Subsequent expenditureThe cost price of replacing part of a property, plant and equipment is included in the carrying value of the asset whenever it is probable that the future economic benefits relating to the assets will flow to the Group and the cost price of the assets can be measured reliably. The cost of daily maintenance of property, plant and equipment is expensed in the income statement as and when incurred.


DepreciationDepreciation is charged to the income statement using the straight-line method over the expected useful life of the asset, or of the separately recorded major components of an asset. It begins when the asset is ready for its intended use. The residual value, useful lives and depreciation methods are reviewed annually. Land is not depreciated. The fair value adjustments for buildings from acquisition are depreciated over the estimated expected remaining useful life up to a maximum of 30 years.

The estimated useful lives are: ★ Buildings: 30 years ★ Fixtures: 5 – 15 years ★ Computers: 3 years ★ Plant, machinery and equipment: 5 – 10 years ★ Furniture and vehicles: 3 – 10 years

INVESTMENT PROPERTYInvestment property is property that is held in order to earn rental income or for capital appreciation or both, but is not intended for sale in the context of usual business opera-tions, for use in the production, for delivery of goods or for administrative purposes.

Investment property is measured at cost, less cumulative depreciation and impairments. The accounting policies for property, plant and equipment apply.

Rental income from investment property is accounted for as described below in the accounting policy for revenue.

INTANGIBLE ASSETS AND GOODWILLGoodwillUp to and including 2009 goodwill was determined as the difference between the purchase price and the Group’s share in the fair value of the acquired identifiable net assets.

The following accounting policy applies as from 2010. Goodwill from an acquisition is the positive difference between the fair value of the consideration transferred plus the carrying amount of any non-controlling interest in the enterprise, or the share in the equity of the acquired enterprise if the acquisition occurs in phases, on the one hand, and the Group’s share in the fair value of the acquired

identifiable assets and liabilities, on the other. If this difference is negative, it is immediately recognized in the income statement.

Goodwill is measured at cost less impairment losses. In respect of equity accounted investees the carrying amount of the investment in the entity also includes the carrying amount of the goodwill. Goodwill is not amortized. Instead, it is subject to an annual impairment test.

Intangible assetsIntangible assets acquired by the Group are measured at cost less accumulated amortization and impairment losses (see below). Costs of internally generated goodwill and brands are recognized in the income statement as incurred.

Internally generated intangible assetsDevelopment activities entail a plan or design for the production of new or fundamentally improved products and processes. Internally generated intangible assets are capitalized whenever the development costs can be reliably determined, the product or process is technically and commercially feasible, the future economic benefits are probable, and the Group intends and has sufficient resources to complete the development and to actively use or sell it. The cost of internally generated intangible assets includes all costs directly attributable to assets, primarily direct employee benefit expenses.

Other development costs and expenditures for research activities are expensed to the income statement as and when incurred.

Subsequent expenditureSubsequent expenditure in respect of intangible assets is capitalized only when it increases the future economic benefits specific to the related asset. All other expenditure is expensed as incurred.

AmortizationAmortization is charged to the income statement by the straight-line method over the expected useful life of the intangible assets. Intangible assets are amortized from the date they are ready for their intended use. Their estimated

74 KINEPOLIS GROUP ANNUAL REPORT 201605 / FINANCIEEL RAPPORT

useful life is 3 to 10 years. The residual value, useful lives and amortization methods are reviewed annually. The Group has no intangible assets with indefinite useful life.

INVENTORIESInventories are measured at the lower of cost or net realizable value. The net realizable value is equal to the estimated sale price, less the estimated costs of completion and selling expenses.

The cost of inventories includes the costs incurred in acquiring the inventories and bringing them to their present location and condition. Inventories are measured using the FIFO method.

IMPAIRMENTNon-financial assetsThe carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. When there is an indication of impairment, the recoverable amount of the asset is estimated. In case of goodwill and intangible assets with an indefinite useful life or which are not yet ready for their intended use, the recoverable amount is estimated at the same date each year. An impairment loss is recorded whenever the carrying amount of an asset, or the cash generating unit to which the asset belongs, is higher than the recoverable amount.

The recoverable amount is the higher of the value in use or the fair value less costs to sell. When determining the value in use, the discounted value of the estimated future cash flows is calculated using a proposed weighted average cost of capital, that reflects both the current market rate and the specific risks with regard to the asset or the cash generating unit. Where an asset does not generate significant cash flows by itself, the recoverable amount is determined based on the cash generating unit to which the asset belongs. Goodwill acquired in a business combination is allocated to groups of cash generating units that are expected to benefit from the synergies of the combination.

Impairment losses are charged to the income statement. Impairment losses recorded in respect of cash generating units are first deducted from the carrying amount of any

goodwill assigned to cash generating units (or groups of units) and then proportionally from the carrying amount of the other assets of the unit (or group of units).

An impairment is reversed when the reversal can be objectively linked to an event occurring after the impair-ment was recorded. A previously recorded impairment is reversed when a change has occurred in the estimates used in determining the recoverable value, but not in a higher amount than the net carrying amount that would have been determined if no impairment had been recorded in previous years. Goodwill impairments are not reversed.

Non-derivative financial assetsFinancial assets that are not measured at fair value with recognition of changes in value in the income statement, including investments that are recognized using the equity method, are assessed at every balance sheet date to determine whether there are objective indications that they have been impaired. A financial asset is deemed to be impaired if there are objective indications that an event has occurred after the initial recognition of the assets that has had a negative impact on the expected future cash flows of that asset and for which a reliable estimate can be made.

Objective indications that financial assets are impaired include the non-fulfillment of payment obligations by and overdue payments of a debtor, restructuring of an amount owed to the Group under conditions that the Group otherwise would not have considered, indications that a debtor or issuer will go bankrupt, detrimental changes in the payment status of debtors or issuers or economic circumstances that go together with defaults. In addition, a significant or prolonged decline in the fair value of investments in equity instruments below cost is an objec-tive indication of impairment. The Group judges that a decline of 20% can be considered to be significant and that a period of nine months can be considered to be prolonged.

Financial assets measured at amortized costSignificant financial assets measured at amortized cost are tested individually for impairment. The other financial assets measured at amortized cost are classified in groups with comparable credit-risk characteristics and assessed collectively. When assessing whether there is a collective


impairment the Group uses historical trends with regard to the likelihood that payment obligations will not be fulfilled, the time within which collection occurs and the level of the losses incurred. The outcomes are adjusted if management judges that the current economic and credit circumstances are such that it is likely that the actual losses will be higher or lower than the historical trends suggest.

An impairment loss with regard to a financial asset mea-sured at amortized cost is calculated as the difference between the carrying amount and the present value of the expected future cash flows, discounted at the original effective interest rate of the asset. Current receivables are not discounted. Losses are recognized in the income statement.

If an event leads to a reduction of the impairment, this reduction is reversed through the income statement.

Financial assets available for sale Impairments on financial assets available for sale are recognized by reclassifying the accumulated loss in the fair value reserve in equity to the income statement. The amount of the cumulative loss transferred from equity to the income statement is equal to the difference between the acquisition price, after deduction of any repayment of the principal, and the current fair value, less any impairment loss that has already been included in the income statement. Changes in provisions for impairments attributable to the application of the effective interest rate method are recognized in interest income.

If the fair value of a financial asset available for sale increases in a subsequent period and the rise can be linked objectively to an event that occurred after the recognition of the impairment loss in the income statement, the impairment loss is reversed. However, if the fair value of an impaired equity instrument available for sale recovers in a subsequent period, the recovered amount is recognized in other comprehensive income.

ASSETS CLASSIFIED AS HELD FOR SALENon-current assets (or groups of assets and liabilities being disposed of) that are expected to be recovered mainly via a sales transaction and not through the continuing use

thereof are classified as held for sale. Directly prior to this classification the assets (or the components of a group of assets being disposed of) are remeasured in accordance with the Group’s financial accounting policies. Hereafter the assets (or a group of assets to be disposed of) are measured on the basis of their carrying amount or, if lower, fair value less cost to sell. Non-current assets are no longer depreciated as soon as they are classified as held for sale. Any impairment loss on a disposal group is allocated in the first place against goodwill and then, proportionally, against the remaining assets and liabilities, except that no impairments are allocated against invento-ries, financial assets, deferred tax assets and employee benefit assets, which will continue to be measured in accordance with the Group’s accounting policies. Impairment losses on initial classification and gains and losses on subsequent measurement are recognized in the income statement.

EMPLOYEE BENEFITSShort-term employee benefitsShort-term employment benefit obligations include wages, salaries and social security contributions, holiday pay, continued payment of wage in the event of illness, bonuses and remuneration in kind. These are expensed when the services in question are provided. Some of the Group’s employees are eligible to a bonus, based on personal performance and financial targets. The bonus amount recognized in the income statement is based on an estimation at the balance sheet date.

Post employment benefits Post employment benefits include the pension plans. The Group provides post-retirement remuneration for some of its employees in the form of defined contribution plans.

Defined contribution plansA defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized as an employee benefit expense in the income statement in the periods during which related services are rendered by employees.


In Belgium employers are obliged to guarantee a minimum return on defined contribution plans throughout the employee’s career (Art. 24 of the Law of 28 April 2003 – WAP). To the extent that the legally guaranteed return is adequately covered by the insurance company, the Group has no further payment obligation towards the insurance company or the employee beyond the pension contribu-tions, recognized through profit and loss in the year in which they are owed. As a consequence of this guaranteed minimum return, all Belgian plans with defined contribu-tions under IFRS are qualified as defined contribution schemes.

The liability recognized on the balance sheet for these defined contribution schemes is the current value of the future benefit obligations that employees have accrued in the fiscal year and previous years minus the fair value of the fund investments. The liability is calculated periodically by an independent actuary using the ‘projected unit credit method’. The fair value of the fund investments is deter-mined as the mathematic reserves that are accrued within the insured plans.

Revaluations of the net liability ensuing from defined pension schemes, which consists of actuarial profit and loss, the return on the fund investments (excluding interest) and the effect of the asset ceiling (if present, excluding interest), are recognized directly in other comprehensive income.

The Group determines the net liability (the net asset) ensuing from defined contribution schemes for the fiscal year using the discount rate employed to value the net liability (the net asset) at the beginning of the fiscal year, with due consideration for any changes to the net liability (the net asset) during the fiscal year as a consequence of contributions and payouts. Net interest charges and other charges with regard to defined contribution plans are recognized in profit and loss.

If the pension entitlements ensuing from a scheme are changed or a scheme is restricted, the resulting change in entitlements with regard to past service or the profit or loss on that restriction is recognized directly in profit or loss. The Group justifies profit or loss on the settlement of a defined contribution plan at the time of that settlement.

Share based payments and related benefitsThe stock option plan enables Group employees to acquire shares of the Company. The option exercise price is equal to the average of the closing price of the underlying shares over the thirty days prior to the date of offer. No compensa-tion costs or liabilities are recognized.

Share transactions with employees are charged to the income statement over the vesting period based on the fair value on the date of offering with a corresponding increase in equity. The fair value is determined using an option valuation model. The amount expensed is determined based on the number of awards for which the service conditions in question are expected to be fulfilled.

To hedge its liabilities within the framework of the allocation of stock options to its Directors and executives the Group purchases its own shares at the specific times those options are allocated. This can occur by means of several purchases. These shares will be charged to equity on transaction date for the sum paid, including the related costs. When the options are exercised the shares are derecognized at the average price of the total package of shares purchased that were allocated to the options in question. The difference between the options exercise price and the average price of the shares in question is recognized directly in equity.

Termination benefits Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those benefits and when the Group recognizes the restructuring expenses. If benefits are payable more than twelve months after the reporting date, then they are discounted to their present value.

PROVISIONSA provision is recorded in the statement of financial position whenever the Group has an existing (legal or constructive) obligation as a result of a past event and where it is probable that the settlement of this obligation will result in an outflow of resources containing economic benefits. Where the effect is material, provisions are measured by discounting the expected future cash flows at a pre-tax discount rate that reflects both the current market assess-ment of the time value of money and, where applicable, the risks inherent to the obligation.


RestructuringA provision for restructuring is set up whenever the Group has approved a detailed, formal restructuring plan and the restructuring has either been commenced or publicly announced before the balance sheet date. No provisions are recognized for future operating costs.

Site restorationIn accordance with the Group’s contractual obligations a provision for site restoration is set up whenever the Group is obliged to restore land to its original condition.

Onerous contractsA provision for onerous contracts is set up whenever the economic benefits expected from a contract are lower than the unavoidable costs of meeting the contract obligations. Before a provision is set up, the Group first recognizes any impairment loss on the assets relating to the contract.

REVENUESales of goods and servicesThe revenue from the sale of goods is recognized in the income statement as from the moment the significant risk and rewards of ownership have transferred to the pur-chaser. Where services are provided the income is recog-nized in the income statement upon delivery of this service.

★ Box office revenue from the sale of cinema tickets (and 3D glasses) is recognized as revenue on the date of showing of the film it relates to;

★ In-theatre sales (ITS) comprises all revenue from the sale of beverages, snacks and merchandise in the multiplexes. In-theatre sales are recognized as revenue at the checkout;

★ Revenue from the advance sale of tickets or other prepaid gift vouchers are recognized in current loans and borrowings and recognized when the ticket holder uses the ticket. The administrative fee is immediately recognized as revenue;

★ Events (business to business) are recognized as revenue as soon as the event is held. If the event takes place over a longer period of time, the revenue is recognized on a straight line basis over the duration of the event;

★ Revenue generated from screen advertising is recognized spread over the period in which the advertising is shown;

★ The theatrical revenue from film distribution will be recognized over the term of the film when the number of visitors is known. Revenue from after theatrical rights are recognized when they can be reasonably estimated.

Rental incomeRental income is recognized in the income statement on a straight-line basis over the rental period. Lease incentives granted are regarded as an integral part of rental income.

Government grantsGovernment grants are regarded as accrued income in the statement of financial position and initially measured at fair value whenever reasonable certainty exists that they will be received and that the Group will comply the associated conditions. Grants that compensate incurred costs are systematically recognized in the income statement in the same period as the costs are incurred. Grants that compen-sate costs incurred in respect of assets are systematically recognized in the income statement over the useful life of the assets.

Finance incomeFinance income comprises interest received on investments, dividends, foreign exchange gains, the unwinding of receivables with regard to government grants and the profits on hedging instruments that are recognized in the income statement.

Interest income is recognized in the income statement based on the effective interest method. Dividend income is included in the income statement on the date that the dividend is declared.

Foreign exchange gains and losses are compensated per currency.

EXPENSESPayments relating to operating lease agreementsPayments relating to operating lease agreements are taken into the income statement on a straight-line basis over the lease period.


Payments relating to finance lease agreementsThe minimum lease payments are recorded partly as finance expenses and partly as repayment of the outstand-ing liability. Finance expenses are allocated to each period of the total lease period in such a way as to give a constant periodical interest rate over the remaining balance of the liability.

Finance expensesThe finance expenses comprise interest to be paid on loans, foreign exchange losses, the unwinding of discounts on non current provisions and losses on hedging instru-ments that are recognized in the income statement.

Interest charges are recognized based on the effective interest method.

Finance expenses directly attributable to the acquisition or construction of a qualifying asset are capitalized as part of the cost of that asset.

Foreign exchange gains and losses are compensated per currency.

INCOME TAX EXPENSEIncome tax expenses consist of current and deferred tax. Income taxes are recorded in the income statement except where they relate to a business combination or elements recorded directly in equity. In this case the income taxes are recognized directly in equity.

Current tax consists of the expected tax payable on the taxable profit of the year, calculated using tax rates enacted or substantively enacted at the balance sheet date, as well as tax adjustments in respect of prior years. The amount of current income tax is determined on the basis of the best estimate of the tax gain or expense, with due consideration for any uncertainty with regard to income tax. For the Belgian Excess Profit Ruling (EPR), we refer to note 8.

Additional income tax resulting from issuing dividends is recorded simultaneously with the liability to pay the dividend in question.

Deferred tax is recorded based on the balance sheet method, for all temporary differences between the taxable base and the carrying amount for financial reporting purposes, for both assets and liabilities. No deferred taxes are recorded for the following temporary differences: initial recording of goodwill, initial recording of assets and liabilities in a transaction that is not a business combination and that do not affect the accounting or taxable profits and differences relating to investments in subsidiaries to the extent that an offsetting entry is unlikely in the near future. The amount of the deferred tax is based on expectations as to the realization of the carrying value of the assets and liabilities, using the tax rates in effect or those of which the enactment has been substantively completed at the balance sheet date.

A deferred tax asset is recorded in the consolidated statement of financial position only when it is probable that adequate future taxable profits are available against which temporary differences can be utilized. Deferred tax assets are reduced whenever it is no longer probable that the related tax benefit will be realized.

The deferred tax receivables and liabilities are offset per tax jurisdiction in so far as there is a de jure enforceable right to balance the amounts recognized and an intention to settle the liability on a net basis or to realize the receivable at the same time as the liability is settled.

SEGMENT REPORTINGAn operating segment is a clearly distinguishable component of the Group that engages in business activities from which it may earn revenue and incur expenses, including revenue and expenses in relation to transactions with any of the Group’s other components. The Group is organized geographically. The different countries constitute operating segments, in accordance with the internal reporting to the CEOs of the Group.

DISCONTINUED OPERATIONSClassification as discontinued operations occurs upon the disposal of or, if earlier, when the business activity fulfills the criteria for classification as held for sale. Whenever an activity is classified as a discontinued operation, the comparative income statement figures are restated as if the activity had been discontinued from the start of the comparative period.


NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTEDA number of new standards, amendments and interpre-tations were not yet effective in the fiscal year ending 31 December 2016 and have therefore not been applied to the present consolidated financial statements.

IFRS 15 Revenue from Contracts with Customers, establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers and SIC 31 Barter Transactions Involving Advertising Services. IFRS 15 is effective for the annual reports beginning on or after 1 January 2018, with early adoption permitted, and has been endorsed by the EU. Clarifications to IFRS 15 Revenue from Contracts with Customers (issued on 12 April 2016) has not yet been endorsed by the EU.

The Group analyzed IFRS 15 in 2016 and does not foresee any material impact on the consolidated financial statements when this standard is applied.

IFRS 16 Leases published on 13 January 2016 makes a distinction between a service contract and a lease based on whether the contract conveys the right to control the use of an identified asset and introduces a single, on-balance lease sheet accounting model for lessees. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are optional exemptions for short-term leases and leases of low value items. Lessor accounting remains similar to the current standard – i.e. lessors continue to classify leases as finance or operating leases. For lessors, there is little change to the existing accounting in IAS 17 Leases.

IFRS 16 replaces existing leases guidance including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions

Involving the Legal Form of a Lease. The standard is effective for annual periods beginning on or after 1 January 2019. Early adoption is permitted for entities that apply IFRS 15 Revenue from Contracts with Customers at or before the date of initial application of IFRS 16. This new standard has not yet been endorsed by the EU.

In 2017 the Group will evaluate the possible effect of application on the consolidated financial statements.

IFRS 9 Financial Instruments published in July 2014 replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements, which align hedge accounting more closely with risk management. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. IFRS 9 is effective for annual periods begin-ning on or after 1 January 2018.

Earlier application is permitted. This new standard has been endorsed by the EU. The Group does not intend to early adopt this standard. These amendments are expected to have no significant influence on the consolidated financial statements of the Group.

The disclosure initiative (amendments to IAS 7) requires disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes. The amendments are effective for annual periods beginning on or after 1 January 2017, with earlier adoption permitted. These amendments have not yet been endorsed by the EU. The Group does not intend to early adopt this standard. These amendments are expected to have no significant influence on the consolidated financial statements of the Group.

Recognition of Deferred Tax Assets for Unrealized Losses (amendments to IAS 12) clarifies the accounting for deferred tax assets for unrealized losses on debt instru-ments measured at fair value. Further, the amendments


provide guidance on estimating probable future taxable profits when assessing the recognition of deferred tax assets when there are insufficient taxable temporary differences relating to the same taxation authority and the same taxable entity. The amendments are effective for annual periods beginning on or after 1 January 2017, with earlier adoption permitted. The amendments are not expected to have a material impact on the Group’s consolidated financial statements. These amendments have not yet been endorsed by the EU.

Classification and Measurement of Share-based Payment Transactions (amendments to IFRS 2) issued on 20 June 2016 covers three accounting areas: the measurement of cash-settled share-based payments; the classification of share-based payments settled net of tax withholdings; and the accounting for a modification of a share-based payment from cash-settled to equity-settled. The amend-ments are effective for annual periods commencing on or after 1 January 2018. As a practical simplification, the amendments can be applied prospectively so that prior periods do not have to be restated. Retrospective, or early, application is permitted if companies have the required information. The amendments are not expected to have a material impact on the Group’s consolidated financial statements. These amendments have not yet been endorsed by the EU.

Transfers of property assets to / from, investment property (amendments to IAS 40) issued on 8 December 2016, clarifies that a property asset is transferred to, or from, investment property when and only when there is an actual change in use. A change in management intention alone does not support a transfer. The amend-ments are effective for annual periods beginning on or after 1 January 2018, with earlier adoption permitted. The amendments are not expected to have a material impact on the Group’s consolidated financial statements. These amendments have not yet been endorsed by the EU.

IFRIC 22 Foreign currency transactions and Advance consideration issued on 8 December 2016, clarifies the transaction date to be used to determine the exchange rate for translating foreign currency transactions involving an advance payment or receipt. The interpretation is

effective for annual periods beginning on or after 1 January 2018, with earlier adoption permitted. The amendments are not expected to have a material impact on the Group’s consolidated financial statements. These amendments have not yet been endorsed by the EU.

Annual improvements to IFRSs 2014-2016 Cycle, issued on 8 December 2016, covers the following minor amendments:

★ IFRS 1 First-time Adoption of IFRS: Outdated exemptions for first-time adopters of IFRS are removed (effective for annual periods beginning on or after 1 January 2018);

★ IFRS 12 Disclosure of Interests in Other Entities: Also applies to interests that are classified as held for sale or distribution (effective for annual periods beginning on or after 1 January 2017) and

★ IAS 28 Investments in Associates and Joint Ventures: A venture capital organization, or other qualifying entity, may elect to measure its investments in an associate or joint venture at fair value (effective for annual periods beginning on or after 1 January 2018, with earlier adoption permitted).

The amendments are not expected to have a material impact on the Group’s consolidated financial statements. These amendments have not yet been endorsed by the EU.

There are no other standards or interpretations that are not yet effective in 2016 and that could have a material impact on the Group.


Poland

SwitzerlandFrance

Spain

Luxembourg

The Netherlands

Belgium

Segment information is given for the Group’s geographic segments. The geographic segments reflect the countries in which the Group operates. Prices for inter-segment trans-actions are determined at arm’s length. The segmented information was drawn up in accordance with IFRS.

Segment results, assets and liabilities of a particular segment include those items that can be attributed, either directly or reasonably, to that segment.

Finance income and cost, income tax expense and their related assets and liabilities are not monitored by segment by the Group’s CEOs and CFO.

The capital expenditures of a segment are all costs incurred during the reporting period to acquire assets that are expected to remain in use in the segment for longer than one reporting period.

GEOGRAPHIC SEGMENTSThe Group’s activities are managed and monitored on a country basis. The main geographic markets are Belgium, France, Spain, the Netherlands and Luxembourg. The Polish and Swiss activities are combined in the ‘Other’ geographic segment, in accordance with the internal reporting to the Group’s CEOs and CFO. Luxembourg was added as a segment in 2015 as a result of the Utopolis acquisition.

In presenting information on the basis of geographic segments, revenue from the segment is based on the geographic location of the customers. The basis used for the assets of the segments is the geographic location of the assets.

2. Segment reporting


Poland

SwitzerlandFrance

Spain

Luxembourg

The Netherlands

Belgium

Geographic markets


STATEMENT OF FINANCIAL POSITION – ASSETS

IN ’000 € 2016

BELGIUM FRANCE SPAIN NETHERLANDS LUXEMBOURG OTHER (POLAND & SWITZERLAND)

NOT ALLOCATED TOTAL

Segment revenue 180 909 71 375 42 732 35 941 14 321 4 721 349 999

Inter-segment revenue -24 074 -502 -387 -4 -51 -43 -25 061

Revenue 156 835 70 873 42 345 35 937 14 270 4 678 324 938

Cost of sales -103 093 -48 208 -30 392 -28 887 -11 449 -2 700 -224 729

Gross profit 53 742 22 665 11 953 7 050 2 821 1 978 100 209

Marketing and selling expenses -11 710 -3 006 -2 158 -1 148 -401 -197 -18 620

Administrative expenses -14 044 -1 596 -900 -1 265 -912 -342 -19 059

Other operating income 176 767 4 36 -1 -1 981

Other operating expenses -177 -16 -26 -1 -84 -304

Segment profit 27 987 18 814 8 873 4 672 1 423 1 438 63 207

Finance income 866 866

Finance expenses -8 485 -8 485

Profit before tax 55 588

Income tax expense -16 622 -16 622Profit for the period from continuing operations 38 966

Profit from discontinued operations, net of tax 8 680 8 680

PROFIT FOR THE PERIOD 47 646

IN ’000 € 2016


NOT ALLOCATED TOTAL

Intangible assets 5 052 425 300 123 5 900

Goodwill 6 586 11 804 2 858 19 661 5 844 6 502 53 255

Property, plant and equipment 76 615 75 446 50 246 98 856 13 136 7 158 321 457

Investment property 13 722 6 721 10 564 31 007

Deferred tax assets 902 902

Other receivables 30 10 925 615 -20 24 11 574


Non-current assets 102 005 98 600 60 740 118 620 19 004 24 224 929 424 122

Inventories 3 779 413 447 529 71 53 5 292

Trade and other receivables 16 304 7 950 1 504 2 216 1 023 373 29 370


Cash and cash equivalents 44 244 44 244

Derivative financial instruments 0 0

Current assets 20 083 8 363 1 951 2 745 1 094 426 44 662 79 324

TOTAL ASSETS 122 088 106 963 62 691 121 365 20 098 24 650 45 591 503 446

INCOME STATEMENT

Segment reporting at 31 December 2016


IN ’000 € 2016


NOT ALLOCATED TOTAL

Share capital and share premiums 20 106 20 106


Translation reserve -1 071 -1 071Total equity attributable to owners of the Company 149 898 149 898

Equity 149 898 149 898

Financial liabilities 207 278 207 278


Provisions 2 233 122 4 153 156 6 664

Deferred tax liabilities 18 324 18 324

Other payables 1 070 7 903 187 14 333 9 507

Non-current liabilities 3 847 8 025 187 4 167 156 225 935 242 317

Bank overdrafts 34 34


Trade and other payables 48 449 20 913 8 655 9 465 2 563 608 90 653

Provisions 89 766 511 1 366

Current tax liabilities 12 182 12 182

Current liabilities 48 538 21 679 8 655 9 976 2 563 608 19 212 111 231

TOTAL EQUITY AND LIABILITIES 52 385 29 704 8 842 14 143 2 719 608 395 045 503 446

STATEMENT OF FINANCIAL POSITION – EQUITY AND LIABILITIES

IN ’000 € 2016


NOT ALLOCATED TOTAL

CAPITAL EXPENDITURE 8 345 11 400 5 636 34 224 104 98 59 807

CAPITAL EXPENDITURE

IN ’000 € 2016


NOT ALLOCATED TOTAL

Depreciation, amortization, provisions and impairments 12 326 6 475 2 966 3 745 1 920 459 27 890

Other 84 84

TOTAL 12 410 6 475 2 966 3 745 1 920 459 27 974

NON-CASH ELEMENTS


STATEMENT OF FINANCIAL POSITION – ASSETS

IN ’000 € 2015


NOT ALLOCATED TOTAL

Segment revenue 187 990 65 169 41 579 23 114 3 428 4 937 326 217

Inter-segment revenue -23 164 -823 -546 -3 -66 -44 -24 646

Revenue 164 826 64 346 41 033 23 111 3 362 4 893 301 571

Cost of sales -107 035 -42 182 -30 309 -16 551 -2 820 -3 096 -201 993

Gross profit 57 791 22 164 10 724 6 560 542 1 797 99 578

Marketing and selling expenses -11 657 -2 474 -2 157 -970 -74 -206 -17 538

Administrative expenses -13 189 -1 386 -833 -1 871 -94 -343 -17 716

Other operating income 226 764 5 1 182 -1 1 177

Other operating expenses -235 -13 -8 -256

Segment profit 32 936 19 055 7 739 3 712 556 1 247 65 245

Finance income 1 140 1 140

Finance expenses -8 894 -8 894

Profit before tax 57 491

Income tax expense -25 236 -25 236

PROFIT FOR THE PERIOD 32 255

IN ’000 € 2015


NOT ALLOCATED TOTAL

Intangible assets 4 476 384 250 1 5 111

Goodwill 6 586 11 804 2 858 19 661 5 845 6 502 53 256

Property, plant and equipment 80 732 70 255 47 650 68 556 14 796 7 212 289 201

Investment property 14 082 6 721 11 162 31 965

Deferred tax assets 670 670

Other receivables 34 11 318 483 -20 30 11 845


Non-current assets 105 910 93 761 57 962 88 197 20 672 24 876 697 392 075

Inventories 3 056 665 480 332 91 70 4 694

Trade and other receivables 20 559 6 584 1 434 2 088 2 114 213 32 992


Cash and cash equivalents 60 432 60 432

Derivative financial instruments 64 64

Current assets 23 615 7 249 1 914 2 420 2 205 283 60 938 98 624

TOTAL ASSETS 129 525 101 010 59 876 90 617 22 877 25 159 61 635 490 699

INCOME STATEMENT

Segment reporting at 31 December 2015


IN ’000 € 2015


NOT ALLOCATED TOTAL

Share capital and share premiums 20 106 20 106


Translation reserve -794 -794Total equity attributable to owners of the Company 123 033 123 033

Equity 123 033 123 033


Provisions 2 251 205 4 705 7 161

Deferred tax liabilities 19 868 19 868

Other payables 1 289 8 668 153 14 10 124

Non-current liabilities 3 540 8 873 153 4 719 233 868 251 153



Trade and other payables 50 410 18 654 6 912 7 492 2 645 853 86 966

Provisions 137 616 753

Current tax liabilities 20 036 20 036

Current liabilities 50 547 19 270 6 912 7 492 2 645 853 28 794 116 513

TOTAL EQUITY AND LIABILITIES 54 087 28 143 7 065 12 211 2 645 853 385 695 490 699

STATEMENT OF FINANCIAL POSITION – EQUITY AND LIABILITIES

IN ’000 € 2015


NOT ALLOCATED TOTAL

CAPITAL EXPENDITURE 7 244 1 990 2 876 41 422 3 87 53 622

CAPITAL EXPENDITURE

IN ’000 € 2015


NOT ALLOCATED TOTAL

Depreciation, amortization, provisions and impairments 12 427 5 475 2 693 1 809 575 516 23 495

Other 255 3 1 259

TOTAL 12 682 5 478 2 694 1 809 575 516 23 754

NON-CASH ELEMENTS


3. RevenueThe table below shows the breakdown of revenue by activity, product or service offered by the Group:

4. Other operating income and expensesOTHER OPERATING INCOME

IN ’000 € 2015 2016

Box office 163 642 175 574

In-theatre sales 66 469 72 860

Business-to-business 43 486 47 598

Brightfish 13 337 11 634

Film distribution 3 579 4 940

Real estate 10 972 12 216

Technical department 86 116

TOTAL 301 571 324 938

IN ’000 € 2015 2016

Government grants 791 765

Reversal of provisions 181

Capital gains on disposal of property, plant and equipment 41 106

Other 164 110

TOTAL 1 177 981

Box office revenue increased less strongly than the visitor numbers. This is primarily due to the changed country mix after expansion, with a lower share for Belgium, and the loss of some VPF revenue. The increase in the visitor numbers (+7.5%) was mainly due to the expansion.

In-theatre sales also increased due to higher visitor numbers and higher revenue per visitor; despite the negative impact of the country mix we saw a rise in the number of products purchased per visitor in all countries.

Business-to-business revenue increased due to the expansion, higher sales of cinema vouchers to busi-nesses and a rise in revenue from screen advertising. Business-to-business revenue includes exchange deals for € 10.6 million (2015: € 11.8 million).

Brightfish generated less revenue, primarily due to the further reduction in revenue from national screen adver-tising in Belgium, as a consequence of the European football championship and continued strong competition from TV and online advertising. The number of advertisers rose slightly, but the budget per campaign declined.

The revenue from film distribution rose, due to a good first quarter, which included ‘Safety First’ and ‘Achter de Wolken’, a strong autumn thanks to the local hits ‘De Premier’ and ‘De Buurtpolitie’, and the success of ‘Bad Moms’ and ‘Mechanic 2: Resurrection’.

Among other things, the higher real estate revenue was driven by the expansion, more revenue from in-house managed concessions (Leonidas Chocolates Café, the Ola Happiness Station and The Magic Forest), a higher occupancy rate and a higher variable rent in Poland.

Government grantsThe Group receives government grants in France from the Centre national du cinéma et de l’image animée (CNC) for cinema related investments. These grants come from a fund financed by contributions from cinema operators in the

form of a percentage of ticket sales. The grants are recorded as liabilities and taken into result over the useful life of the related assets at € 0.8 million in 2016 (2015: € 0.7 million).


OTHER OPERATING EXPENSES

IN ’000 € 2015 2016

Losses on disposal of property, plant and equipment -240 -214

Other -16 -90

TOTAL -256 -304

IN ’000 € 2015 2016

Wages and salaries -34 008 -38 764

Social security contributions -8 909 -9 386

Employer contributions for employee insurances -728 -829

Share-based payments -259 -84

Other employee benefits -1 899 -2 999

TOTAL -45 803 -52 062

Total full-time equivalents at balance sheet date 1 091 1 124

Losses on disposal of property, plant and equipment primarily relate to the sale of projectors in Belgium.

5. Employee benefit expenses

The increase in employee benefit expenses in 2016 is mainly due to the higher number of full-time equivalents at 31 December 2016 due to the Group’s expansion in France and the Netherlands. This rise is partly offset by improved efficiency in staff planning in the cinemas in all countries and the maximized use of temporary staff in Belgium.

The employee benefit expenses also include early retire-ment pensions, which, in accordance with IFRS, should be treated as termination benefits, as no reasonable expecta-tion was generated among employees during hiring or employment that they would be entitled to an early retirement pension before the legal retirement age. They are non-material amounts.

Clarification of pension liabilities and pension costsThe amounts on the balance sheet are determined as follows:

IN ’000 € 2016

Defined benefit plan 541

Other 3

TOTAL 544

The pension plans held in Belgium by the Group are included under ’Defined benefit plan’.

The Group has three pension plans that are deemed to be pension plans with defined contributions by law. As Belgian law applies to all second pillar pension plans (the Vandenbroucke Law) all Belgian plans with defined contributions under IFRS are qualified as defined benefit plan. The Vandenbroucke Law states that, in the context of

defined contribution plans, the employer must guarantee a minimum return of 3.75% on employee contributions and 3.25% on employer contributions. As from 1 January 2016 these percentages were replaced by a single percentage, which will be adjusted based on market returns but will be no less than 1.75% and no more than 3.75%, which reduces the risk for the employer.

These minimum return requirements for the defined contribution plans in Belgium exposes the employer to a financial risk (because there is a legal obligation to pay future contributions if the fund has insufficient assets to pay all employee benefits related to the work performed by the employees in the current and past periods). As a consequence, these plans must be classified and recognized in the accounts as a defined benefit plan as under IAS 19.

Up to and including the fiscal year ending on 31 December 2015 the Group applied the Intrinsic Value method, which consists of calculating the minimum guaranteed reserve for each member separately (bearing in mind an interest rate of 3.75% for employee contribu-tions and an interest rate of 3.25% for employer contri-butions) and the mathematical reserve, both at financial reporting date. The guaranteed reserve is equal to the highest of the minimum guaranteed reserve and the mathematical reserve.

A deficit occurs when the guaranteed reserve is higher than the mathematical reserve. Based on the quantitative disclosures, as shown in the table below, there was no


IN ’000 € 31 DECEMBER 2016

RISE FALL

Discount rate (1% movement) -366 469 Future pay fluctuation (1% movement) 70 -52

Life expectancy (1% movement) -1 1

IN ’000 € 2015

Mathematical reserves 3 614

Minimum guaranteed reserves 3 336

SURPLUS 278

IN ’000 € 2015

At 1 January 2015 3 492

Payments -233

Premiums 270

Return on assets 65

Acquisitions through business combinations 20

At 31 December 2015 3 614

IN ’000 € 2016

Liability from defined benefit plan 4 185

Fair value of fund investments -3 644

Net liability (-asset) from defined benefit plan 541

31 DECEMBER 2016

Weighted average discount rate 1.20% / 1.60% / 1.70%

Expected inflation 1.75%

Expected general pay rise 2.75%

IN ’000 € 31 DECEMBER 2016

Included in the income statement

Pension costs allocated to the year of service -301

-301

Included in other comprehensive income

Changes to estimates of defined benefit plans -541

-541

Total comprehensive income -842

As from 2016 the Group switched from the Intrinsic Value method to the Projected Unit Credit method. This change of method is considered to be a change in estimate and recog-nized through unrealized results in accordance with IAS 19R.

The amounts for the pension plans held in Belgium are determined as follows as at 31 December:

deficit in the plans at 31 December 2015 compared to the minimum guaranteed returns on the contributions. Therefore no provision was set up at 31 December 2015.

Assets concern qualifying insurance policies and are not part of the financial instruments of the Group. The minimum return guarantee is 1.75%.

Actuarial assumptions The main actuarial assumptions are:

Life expectancy is based on the Belgian mortality table MR/FR, adjusted by -5 years.

The expected pension costs from defined benefit plans for 2017 are € 0.2 million and primarily relate to allocated pension costs.

SENSITIVITY ANALYSIS

Its defined benefit plans expose the Group to a number of risks, the most important of which are explained below:

★ Changes to discount rate: a reduction in the discount rate leads to an increase in the liabilities

★ Salary risk: the gross liabilities of most schemes are calculated on the basis of the future payments to the participants. As a consequence, a higher than expected salary rise will lead to higher liabilities.

★ Lifelong risk: pension plans provide participants benefits as long as they live, so an increase in life expectancy will result in an increase in plan liabilities.

Dutch pension plansIn the Netherlands there is a pension fund for the whole media industry, which includes a pension plan for the film and cinema industry. It concerns a ‘defined contribution’ plan in which all employees of the Dutch entities, older than twenty, participate. There are no guarantees with regard to return. Costs related to the Dutch pension plans were € 0.4 million in 2016 (2015: € 0.3 million).

Total comprehensive income For these pension plans the following amounts are included in total comprehensive income:


6. Additional information on operating expenses by natureEmployee benefit expenses and other social benefits are charged to the following lines of the income statement:

IN ’000 € 2015 2016

Cost of sales -32 748 -39 174

Marketing and selling expenses -5 283 -5 349

Administrative expenses -7 772 -7 539

TOTAL -45 803 -52 062

Depreciation and amortization are charged to the following lines of the income statement:

IN ’000 € 2015 2016

Cost of sales -22 259 -25 912

Marketing and selling expenses -613 -1 024

Administrative expenses -700 -685

TOTAL -23 572 -27 621

7. Finance income and expenses FINANCE INCOME

IN ’000 € 2015 2016

Interest income 66 59

Foreign exchange gains 239 106

Unwinding of non-current government grants receivable 647 622

Other 188 79

TOTAL 1 140 866

IN ’000 € 2015 2016

Interest expenses -7 056 -7 192

Foreign exchange losses -245 -82

Other -1 593 -1 211

TOTAL -8 894 -8 485

FINANCE EXPENSES

The Group paid more interest in 2016 due to the prefinancing of planned expansion projects. This rise in the interest charges was partly offset by the activation of interest charges linked to construction costs for € 0.6 million.

The total costs with regard to the refinancing of the Group in 2012 were € 1.1 million. These are recognized in the income statement using the effective interest method at € 0.1 million in 2016 (2015: € 0.1 million) and are included in the interest expenses. The costs with regard to the refinancing of the Group in 2015 were € 1.6 million (see note 20). These are recognized in the income statement using the effective interest method at € 0.2 million in 2016 (2015: € 0.2 million) and are also included in the interest expenses.

The group employs a general financing policy, so a weighted average interest rate of 3.16% is applied when activating the interest expenses of construction projects.

The other finance expenses mainly include banking costs. These also include commitment fees with regard to the credit agreement the Group refinanced in 2016 (see note 24) at € 0.3 million (2015: € 0.2 million).


8. Income tax expensesIN ’000 € 2015 2016

Current tax expenses -17 375 -18 079

Belgian Excess Profit Ruling -9 355

Deferred tax expenses 1 494 1 457

TOTAL -25 236 -16 622

On 11 January 2016, The European Commission published a decision that a purported regime of Belgian tax rulings with regard to ‘Excess Profit’ should be considered as illegal state aid. The European Commission’s decision requires the Belgian government to asses back taxes from companies that received a tax ruling as if such a ruling did not exist. On 22 March 2016, the Belgian government appealed against the European Commission’s decision before the European General Court. The appeal has no suspensive effect.

The Belgian tax authority has granted such a tax ruling to Kinepolis Group in 2012. As a result of the European Commission’s decision, Kinepolis has recorded a provision of € 9.4 million, in compliance with IAS 12, to cover the potential assessment of taxes on the excess profits that, following the ruling, were not taken into account in the taxable base. The amount fully covers the potential liability, including interest charges.

In June 2016, the Belgian government issued several communications, which provide information on the methodology that should be used to determine the amount of the taxes to be recovered. The € 9.4 million EPR provision complies with the methodology communicated.

Disputed assessments were established for the financial years 2012, 2013 and 2014 and € 6,3 million has been paid. A final assessment has not yet been established for the financial year 2015.

On 1 July 2016 Kinepolis Group, together with the other companies involved, appealed against the decision of the European Commission at the European Court of Justice. If the appeal of Kinepolis Group is successful, all paid amounts will be refunded to Kinepolis. The final judgment of the European Court of Justice is not expected for a few years.

The effective tax rate was 29.9% in 2016 (2015: 43.9%). Excluding the EPR tax, the effective tax rate in 2015 was 27.6%. The lower income tax was primarily due to the fall in taxable profit and lower notional interest deduction.

The ‘Other adjustments’ primarily relate to income tax with regard to current and future intra-group dividend payments and the fairness tax.

The change in the interest rate in France concerns the future reduction in the corporate income tax rate in France from 33.33% to 28%.

Effective tax rate reconciliation

IN ’000 € 2015 2016


Belgian tax rate 33.99% 33.99%

Income tax using the Company’s domestic tax rate -19 541 -18 894

Belgian Excess Profit Ruling (EPR) tax -9 355

Effect of tax rates in foreign jurisdictions 376 585

Non-deductible expenses -562 -497

Tax-exempt income 4 076 917

Use of unrecognized losses and tax losses for which no deferred tax asset was recognized 169 23

Under/(over) provided in prior periods 90 220

Change in tax rate in France 941

Other adjustments -489 83

TOTAL INCOME TAX EXPENSE -25 236 -16 622

Effective tax rate 43.90% 29.90%


IN ’000 € PATENTS AND LICENSES OTHER INTERNALLY GENERATED

INTANGIBLE ASSETS TOTAL

Acquisition value 8 840 1 111 1 985 11 936

Amortization and impairment losses -5 523 -748 -1 667 -7 938

NET CARRYING AMOUNT AT 31/12/2014 3 317 363 318 3 998

Acquisitions 1 327 18 631 1 976

Sales and disposals -16 -16

Amortization -682 -127 -38 -847



NET CARRYING AMOUNT AT 31/12/2015 3 946 254 911 5 111

Acquisitions 1 341 94 322 1 757

Sales and disposals -5 -5

Transfer from / to other categories 168 -31 137

Amortization -945 -17 -138 -1 100



NET CARRYING AMOUNT AT 31/12/2016 4 505 300 1 095 5 900

9. Intangible assets

The patents and licenses mainly comprise software pur-chased from third parties. The internally generated intangi-ble assets concern the changes to software for the Group’s ticketing system.

The acquisitions in 2016 mainly concern the expenditures for the renewal of the front office software of the Group for € 0.6 million. These comprise internal hours worked for € 0.3 million and purchases from third parties for € 0.3 million.

10. Goodwill and business combinationsGOODWILL

IN ’000 € 2015 2016

BALANCE AT END OF PREVIOUS PERIOD 36 116 53 256

Acquisitions through business combinations 17 340

Adjustments to goodwill -200

BALANCE AT END OF CURRENT PERIOD 53 256 53 255

The acquisitions through business combinations are discussed elsewhere in these notes (see Business combinations).

At the end of 2016, as every year in this period, a review was performed to identify any indications of impairment of non-financial assets. During this review the Group consid-ered, among other things, the economic situation, the evolution of visitor figures, EBITDA and the components that make up the weighted average cost of capital determined by the Group, especially the risk-free interest rate, the market risk premium and the cost of debt.

An annual impairment test must be performed for cash generating units to which goodwill is allocated, regardless of whether there are any indications of impairment.

No impairments were recognized on the basis of the impairment tests performed.

Management monitors the impairments, as always, at country level. This is also the level at which goodwill is monitored for internal control purposes.

The cash flows of the Group are generated per country:


★ Programming of films and negotiations with distributors occur at country level;

★ A large percentage of tickets are sold through the websites, which are organized at country level;

★ The pricing of tickets, refreshments and snacks is set at country level;

★ Marketing contributions by distributors are negotiated on a country by country basis.

★ Screen advertising is managed on a country basis; ★ Vouchers are sold through the business-to-business

sales teams. Customers use their vouchers through the central back office systems at country level;

★ The business-to-business events are organized at complex and at country level.

In the impairment tests the value in use was taken into consideration. For all cash generating units the value in use was defined by discounting the future cash flows calculated over the period 2018 to 2036, based on the budget for 2017. The future cash flows are calculated over a period of 20 years, since the Group owns nearly all of its property, which guarantees exploitation in the long run.

For the period 2018 to 2036 the data of the 2017 budget for all cash flow generating units were extrapolated on the basis of the following assumptions:

★ The visitor figures were determined based on historically low numbers;

★ EBITDA grows by 1% annually, presuming that the Group is able to take further measures to increase the margin;

★ The maintenance capital expenditures are based on the historical run rate and increase by 1% every year as from 2018.

The projections are performed in the functional currency of the relevant country and discounted at the weighted average cost of the country’s capital. The proposed weighted average cost of capital is 4.98% for Belgium, 4.85% for France, 4.71% for the Netherlands, 6.71% for Spain, 4.43% for Luxembourg, 7.34% for Poland and 4.34% for Switzerland (2015: 4.58% for Belgium and France, 4.62% for the Netherlands, 6.18% for Spain, 5.77% for Poland and 4.27% for Switzerland), determined on the basis of the following theoretical parameters:

2015 2016RISK-FREE

INTEREST RATEMARKET RISK

PREMIUM BETA PROPOSED COST OF DEBT(1)

RISK-FREE INTEREST RATE

MARKET RISK PREMIUM BETA PROPOSED COST

OF DEBT (1)

Belgium 2.17% 5.17% 1.00 4.75% 0.67% 5.33% 0.90 3.20%

France 2.17% 5.17% 1.00 4.75% 0,50% 5.33% 0.90 3.20%

Spain 5.00% 5.17% 1.16 5.71% 1.25% 5.33% 1.16 3.20%

Netherlands 2.17% 5.17% 1.00 4.61% 0.31% 5.33% 0.90 3.20%

Luxembourg 0% 5.33% 0.90 3.20%

Switzerland 2.17% 5.17% 1.00 3.60% -0.17% 5.33% 0.90 3.20%

Poland 2.17% 5.17% 1.00 6.64% 3,35% 5.33% 0.90 3.20%

(1) Before tax

These percentages are tested annually against the weighted average cost of capital based on the parameters used by the analysts that monitor the share of the Group, taking into account the specific circumstances in each country. There was a significant margin each time. The weighted average cost of capital before tax is 5.14% for Belgium, 5.00% for France, 4.83% for the Netherlands, 6.83% for Spain, 4.57% for Luxembourg, 4.42% for Switzerland and 7.43% for Poland (2015: 5.53% for Belgium and France, 5.43% for the Netherlands, 4.72% for Switzerland, 7.30% for Spain and 6.78% for Poland). These percentages before tax do not differ strongly from the iterative calculation.

Management believes that the assumptions used in the impairment tests provide the best estimates of the future developments and believes that no reasonably possible change in any of the principle assumptions would lead to a carrying amount of the cash generating units that would materially exceed their recoverable amount. Sensitivity analyses were performed with regard to the various parame-ters. An example is given below.

A further possible increase from 3.20% to 6.00% in the cost of debt before tax results in a 0.27% increase in the weighted average cost of capital. This possible change would not lead to the need to recognize an impairment.


BUSINESS COMBINATIONS

Taking over the operation of the cinema in the Rouen Saint-Sever shopping centreOn 13 January 2016 Kinepolis Group took over the operation of the cinema located in the Saint-Sever shopping center in the heart of Rouen (Normandy, France). Previously run by UCG, the cinema has 14 screens and 2 500 seats, and welcomed more than 400 000 visitors in 2015.

The takeover of the Rouen Saint-Sever multiplex fits into Kinepolis’ expansion strategy of Kinepolis. It is the first Kinepolis cinema in Normandy and the tenth in France following the takeover of a cinema near Lyon and the Utopolis cinema in Longwy in 2015.

The purchase price was € 0.4 million.

Property, plant and equipment primarily concern chairs, air conditioning and screens.

Goodwill per cash generating unit

IN ’000 € 2015 2016

Belgium 6 586 6 586

France 11 804 11 804

Spain 2 858 2 858

Netherlands 19 661 19 661

Luxembourg 5 845 5 844

Poland 6 502 6 502


Result from discontinued operations (sale of Belgian Utopolis cinemas)Kinepolis Group NV completed the acquisition of Utopolis (Utopia SA), excluding the Belgian complexes, on 9 November 2015. The acquisition of the Belgian cinemas was subject to the approval of the Belgian Competition Authority (BCA).

On 25 March 2016 the BCA approved the acquisition of the Belgian Utopolis cinemas by Kinepolis Group, on the condition that the complexes in Mechelen and Aarschot were resold with a view to their further exploitation. Following this decision Kinepolis took over the Belgian Utopolis cinemas in Lommel, Turnhout, Mechelen and Aarschot on 14 April 2016 following the agreement signed on 9 November 2015 with the shareholders of Utopia SA, for € 24.5 million after deduction of cash acquired. Ahead of the sale of at least the complexes in Mechelen and Aarschot, exploitation at these cinemas continued under the conditions imposed by the BCA. The four Belgian cinemas were part of the legal entity Utopolis Belgium NV. Upon acquisition, this company was recognized as assets classified as held for sale.

IN ’000 € ROUEN

Property, plant and equipment 440

TOTAL 440

IN ’000 € ROUEN

NET IDENTIFIABLE ASSETS AND LIABILITIES 440

Property, plant and equipment 440

REMUNERATION 440

GOODWILL

Acquired cashACQUISITION OF SUBSIDIARIES, NET OF ACQUIRED CASH, IN THE STATEMENT OF CASH FLOWS

440

TOTAL 440


On 30 September 2016 Kinepolis Group NV sold 100% of the shares of Utopolis Belgium NV, including the four Belgian Utopolis cinemas, to UGC.

Profit from discontinued operations is € 8.7 million.

Mégaroyal’s property, plant and equipment primarily relate to the Bourgoin cinema complex.

The total of the acquired cash of Mégaroyal is € 0.8 million, comprising cash and cash equivalents (€ 0.2 million), a term deposit (€ 1.9 million) and an outstanding loan that was repaid immediately after the acquisition (€ 1.3 million).

Acquisition of UtopolisOn 10 July 2015 Kinepolis Group NV announced it had reached an agreement in principle on the acquisition of the Utopolis group (Utopia SA) subject to the fulfillment of conditions. The acquisition of Utopolis (Utopia SA), excluding the Belgian complexes, was completed on 9 November 2015. The acquisition comprises nine com-plexes in three countries: the Grand Duchy of Luxembourg (3), the Netherlands (5) and France (1).

Utopolis SA has three complexes in the Grand Duchy of Luxembourg (two in Luxembourg City and one in Esch-sur-Alzette), five in the Netherlands (Oss, Almere, Zoetermeer, Den Helder and Emmen) and one in France (Longwy), plus four in Belgium (Mechelen, Turnhout, Aarschot and Lommel) that are not part of the transaction at this time. Utopia SA primarily operates cinema complexes and owns the properties housing several of its multiplexes. A number of complexes are leased to third parties.

The inclusion of Utopolis group in the consolidation scope of the Group on 9 November 2015, the date on which effective control was acquired, resulted in goodwill of € 9.4 million. The origin of this goodwill is the targeted visitor potential of the existing cinemas.

The transaction costs linked to this acquisition were € 0.8 million and were recognized in profit and loss as part of the administrative expenses.

IN ’000 €

Enterprise value 36 229

Equity value 33 000Assets classified as held for sale after repayment of loan 26 362

Profit from the sale of Utopolis Belgium 6 638Additional corrections (result April-July profit Utopolis, tax on statutory surplus value, repayment receivable Utopia)

2 042

Profit from discontinued operations 8 680

Basic and diluted earnings per share from discontinued operations is € 0.32.

Acquisitions in 2015

Acquisition of the French Mégaroyal complexThe Group acquired the French Mégaroyal complex in early July 2015. Mégaroyal is a complex with 12 screens and around 2 100 seats located in Bourgoin-Jallieu, 35km east of Lyon. Mégaroyal currently welcomes some 600 000 visitors per year. This acquisition will further strengthen the Group’s position on the French market.

The consideration price was € 12.5 million. The inclusion of Mégaroyal in the consolidation scope of the Group on 8 July 2015, the date on which effective control was acquired, resulted in goodwill of € 7.9 million. The origin of this goodwill is the targeted visitor potential of the cinemas, synergies and the expansion of market share in France.

The transaction expenses linked to this acquisition were € 0.1 million and were recognized in profit and loss as part of the administrative expenses.


IN ’000 € MÉGAROYAL UTOPOLIS

Property, plant and equipment 7 166 36 747

Non-current other receivables 2 551 907

Inventories 25 190

Current trade and other receivables 380 2 610

Cash and cash equivalents 211 6 328

Non-current loans and borrowings -3 085 -1 453

Deferred tax liabilities -1 018 -5 114

Provisions -4 868

Current loans and borrowings -7 055

Current trade and other payables -1 546 -3 467

Current tax liabilities -117 -2 040

TOTAL 4 567 22 785

Net identifiable assets and liabilities

A € 4.7 million provision was recognized with regard to the unfavorable lease on the cinema complex in Almere (the Netherlands).

The current financial liability was immediately paid after the transaction and replaced by an internal loan.

€ 20.6 million of the property, plant and equipment of Utopolis relates to the cinema complexes in Kirchberg (Luxembourg), Longwy (France), Zoetermeer, Emmen and Oss (the Netherlands). The nominal value of the trade receivables of the Utopolis group on the acquisition date was € 1.1 million. € 0.0 million of this was deemed uncollectable.

IN ’000 € MÉGAROYAL UTOPOLIS

NET IDENTIFIABLE ASSETS AND LIABILITIES 4 567 22 785

Cash (1) 12 500 32 192

Contingent considerations

REMUNERATION 12 500 32 192

GOODWILL 7 933 9 407

Acquired cash (2) 844 6 328ACQUISITION OF SUBSIDIARIES, NET OF ACQUIRED CASH, IN THE STATEMENT OF CASH FLOWS (1) – (2) 11 656 25 864

Goodwill calculation and reconciliation with the consolidated statement of cash flows

This goodwill is not tax-deductible.

Contingent considerations Wolff Bioscopen groupAt 31 December 2016 the fair value of the contingent considerations with regard to the acquisition of the Wolff Bioscopen group was € 1.1 million (2015: € 1.3 million).

In 2016, € 0.2 million was paid to the former shareholders of the Wolff Bioscopen group. In 2016 there was no fair value change to the contingent considerations (2015: € 0.2 million).

The fair value of the contingent considerations was deter-mined on the basis of the following assumption:

★ The number of visitors of the new future cinema in Utrecht (the Netherlands) in the third year after opening.

For more information about the fair value of the contingent considerations, see note 24.


IN ’000 € LAND AND BUILDINGS

PLANT, MACHINERY &

EQUIPMENTASSETS UNDER CONSTRUCTION TOTAL


Depreciation and impairment losses -177 801 -158 029 -335 830

NET CARRYING AMOUNT AT 31/12/2014 173 615 40 261 1 459 215 335

Acquisitions 32 180 7 998 11 539 51 717

Sales and disposals 7 -398 -60 -451

Acquisitions through business combinations 40 803 3 110 43 913

Transfer from / to other categories 24 106 -130

Depreciation -11 080 -10 955 -22 035

Effect of exchange rate fluctuations 686 36 722




Acquisitions 36 053 21 046 1 043 58 142

Sales and disposals -22 -284 -102 -408

Acquisitions through business combinations 440 440

Transfer from / to other categories 10 982 927 -12 046 -137

Depreciation -13 716 -12 127 -25 843

Effect of exchange rate fluctuations 60 3 -1 62




11. Property, plant and equipment

In 2016, no new digital projectors were leased under this sale and lease-back agreement (2015: € 0.0 million). The carrying amount of these leased machines and equipment was € 2.3 million at 31 December 2016 (2015: € 4.2 million). During the term of the lease, the leased assets can be bought back at their present value under the contract, plus a fine. At the end of the contract the assets can be acquired at 1% of their original value according to the stipulations of the contract.

The digital projectors of the acquired Wolff Bioscopen group were sold to a third party at acquisition price in 2011 and leased back for a period of up to ten years. The other party in this transaction acts as central manage-ment organization with regard to the various parties involved in the collective digitization of the Dutch film industry. The aim of these transactions was to use the structure of the buyer by which investments in digital equipment can be partly earned back with the coopera-tion of the film distributors. In exchange for Wolff Bioscopen declining the contribution of the industry for investing in digital equipment a lower rent is charged for the digital projectors. The projectors will become the Group’s property as soon as the investment has been earned back by the buyer. If the contract is prematurely

AcquisitionsThe acquisitions in 2016 included the ongoing investments with regard to the building of new complexes in Dordrecht, Breda and Utrecht (the Netherlands), Nevada (Spain) and Fenouillet (France), the installation of Cosy Seating in nine cinemas and the renovation of Kinepolis Bourgoin (France), Enschede and Groningen (the Netherlands).

Sales and disposalsThe sales and disposals of Plant, Machinery and Equipment mainly concern the disposal of old projectors and servers.

Leased buildings The lease on the complex in Groningen (the Netherlands) was recognized as a financial lease. At 31 December 2016 the net carrying amount was € 8.2 million (2015: € 8.6 million).

Leased plant, machinery and equipmentIn 2010 the Group’s existing digital projectors were sold to a third party at net carrying amount and leased back for a period of six years. A number of new digital projectors were also leased.


12. Investment propertyIN ’000 € LAND AND

BUILDINGSPLANT,

MACHINERY & EQUIPMENT

TOTAL

Acquisition value 37 655 498 38 153

Depreciation and impairment losses -5 093 -432 -5 525

NET CARRYING AMOUNT AT 31/12/2014 32 562 66 32 628

Acquisitions 19 19

Depreciation -673 -15 -688

Effect of exchange rate fluctuations 6 6




Acquisitions 67 1 68

Depreciation -662 -15 -677

Effect of exchange rate fluctuations -348 -1 -349




ended by the Group, the leased asset must be repurchased as their carrying amount increased with the outstanding capital payment as well as a fine. At 31 December 2016 the net carrying amount of the projectors was € 0.2 million (2015: € 0.3 million).

In 2014 new digital projectors and servers were installed in the acquired complexes in Alicante and Madrid (Spain). These projection systems were leased from a third party for a maximum period of 10 years at 20% of the total investment amount. In exchange for an 80% discount, the Group grants its virtual print fee revenue to recover its investment in these digital projection systems to the third party, who acts as integrator with regard to various involved parties in the digitization of the Spanish film industry. A variable consideration will also be charged if the agreed average projection ratio is not achieved.

At the end of the contract the Group will become the owner of the projection system without any further settlement. In the event of premature ending of the contract by the Group, the Group must pay the unrecovered investment costs. At 31 December 2016 the net carrying amount of these assets was € 0.2 million (2015: € 0.3 million).

For more information about the related finance lease liabilities, see note 20.

Acquisitions through business combinationsThe acquisitions in 2016 led to an increase in property, plant and equipment of € 0.4 million (Rouen) (2015: € 43.9 million (Mégaroyal: € 7.2 million; Utopolis: € 36.7 million)).

For more information about business combinations, see note 10.


Since 18 January 2007 the land, buildings, machines and equipment in Poznań (Poland) are no longer used for Kinepolis’ own operations, but leased to Cinema City, owned by the cinema group Cineworld, and to a number of smaller third parties. As required by IAS 40 (Investment property), the assets in question have been classified as investment property. In 2012 the Group received a new bank guarantee on first demand for € 0.2 million from Cinema City.

The total carrying amount of the investment property in Poland is € 10.5 million (2015: € 11.2 million).

The Toison d’Or cinema building in Brussels (Belgium) has been part of the investment property (€ 13.7 million) since 2014, while the plot of land in Valencia (Spain) has been part of the investment property (€ 6.7 million) since 2015.

Rental income from investment property was € 2.1 million (2015: € 1.9 million). The direct operating charges (including repairs and maintenance) ensuing from investment property were € 0.6 million (2015: € 0.6 million).

Fair valueThe fair value of the investment property is measured periodically by independent experts.

The external experts possess the requisite recognized professional qualifications and experience in apprais-ing real estate at the locations and in the categories concerned.

The fair value of the investment property was € 41.9 mil-lion (2015: € 41.9 million).

The fair value of the investment property is recognized as a level 3 fair value based on the unobservable inputs that were used for the measurement. The market approach is used for the measurement of the fair value of the land and buildings. The independent experts base the price per square meter on their knowledge of the market and infor-mation on market transactions with regard to comparable assets. The size, characteristics, location and layout of the land and buildings and the destination of the area in which they are situated have also been taken into account. When determining the fair value of the buildings, their accessibility and the visibility from the street are also taken into account. The fair value of the other assets that are part of investment property is measured on the basis of the cost approach, in which the current replacement value of the assets is adjusted to account for physical, functional and economic obsolescence.

13. Deferred taxThe decrease in the deferred tax liabilities primarily relates to a decrease in the deferred tax on the intangible assets and property, plant and equipment.

Temporary differences for which no deferred tax assets are recognizedNo deferred tax asset is recognized in the statement of financial position in respect of tax losses carried forward and unused tax credits that would result in a deferred tax asset of € 7.2 million (2015: € 7.5 million), because it is improbable that sufficient taxable profits will be available in the foreseeable future to be able to benefit from the tax

gain. The tax losses carried forward can be carried forward to an unlimited degree for Belgium, France and Luxembourg.

Temporary differences for which deferred tax liabilities are recognizedIn 2016 a deferred tax liability of € 1.9 million was recognized in connection with all distributable reserves in the subsidiaries of the Group (2015: € 1.9 million). This deferred tax liability was allocated to the invest-ments in subsidiaries in the table below.


14. InventoriesIN ’000 € 2015 2016

3D glasses 705 632

Goods purchased for resale in the complexes 1 779 1 753

Components inventory technical department 2 170 2 822

Other 40 85

TOTAL 4 694 5 292

The cost of sales of inventories recognized in the income statement was € 18.5 million (2015: € 17.6 million).

IN ’000 €2014

RECOGNIZED IN PROFIT AND LOSS

RECOGNIZED IN OTHER

COMPREHENSIVE INCOME

ACQUISITIONS THROUGH BUSINESS

COMBINATIONS2015

RECOGNIZED IN PROFIT AND LOSS

RECOGNIZED IN OTHER

COMPREHENSIVE INCOME

2016

Property, plant and equipment and other intangible assets -17 973 2 826 -8 066 -23 213 1 851 -21 362

Receivable CNC government grants 1 249 -214 47 1 082 -347 735

Inventories 5 -1 4 -1 3

Trade and other receivables 70 -200 -130 11 -119

Provisions -161 -29 1 157 967 -161 806

Deferred CNC government grants 220 301 -236 285 102 387

Provisions for employee benefits 184 184Derivative financial instruments through equity -9 -13 -22 135 113

Tax losses carried forward and other deferred tax assets 3 063 -412 966 3 617 42 3 659

Trade and other payables 88 7 95 12 107

Investments in subsidiaries -1 099 -782 -1 881 -54 -1 935

TOTAL -14 547 1 494 -13 -6 132 -19 197 1 457 319 -17 422

Changes in deferred tax balances during the year

IN ’000 € 2015 2016

ASSETS LIABILITIES DIFFERENCE ASSETS LIABILITIES DIFFERENCE

Property, plant and equipment and other intangible assets 728 -23 940 -23 213 658 -22 019 -21 362

Receivable CNC government grants 1 082 1 082 735 735

Inventories 4 4 3 3

Trade and other receivables 57 -187 -130 146 -265 -119

Provisions 1 176 -209 967 1 038 -232 806

Deferred CNC government grants 842 -557 285 849 -462 387


Derivative financial instruments through equity -22 -22 113 113

Tax losses carried forward and other deferred tax assets 3 617 3 617 3 659 3 659

Trade and other payables 95 95 153 -46 107

Investments in subsidiaries -1 881 -1 881 -1 935 -1 935

TOTAL 7 600 -26 797 -19 197 7 538 -24 960 -17 422

Tax offsetting -6 929 6 929 -6 636 6 636NET DEFERRED TAX ASSETS AND LIABILITIES 670 -19 868 -19 197 902 -18 324 -17 422

The deferred tax assets and liabilities recognized in the statement of financial position can be attributed as follows:


15. Trade receivables and other assetsNon-current other receivables

IN ’000 € 2015 2016

Cash guarantees 1 051 1 175

Other receivables 10 794 10 399

TOTAL 11 845 11 574

IN ’000 € 2015 2016

Trade receivables 26 497 23 387

Taxes receivable, other than income taxes 1 421 2 254

Deferred charges and accrued income 80 78

Tax shelter receivables 168 148

Tax shelter investments 318 313

Other receivables 4 508 3 190

TOTAL 32 992 29 370

The non-current other receivables entirely relate to the sector-related government grants that can be obtained in

The fall in trade receivables is primarily related to Brightfish, business-to-business activities and improved follow-up.

The tax shelter receivables concern the loans made to third parties to finance and support the film production in Belgium. The tax shelter investments concern the film rights the Group acquires as part of tax shelter transactions.

France from the CNC based on the number of visitors.

The other current receivables primarily consist of the current portion of the French sector-related government grants (CNC) for € 2.7 million (2015: € 2.7 million).

Current trade receivables and other assets

IN ’000 €2015 2016

GROSSCARRYING AMOUNT

IMPAIRMENTNET

CARRYING AMOUNT

GROSSCARRYING AMOUNT

IMPAIRMENTNET

CARRYING AMOUNT

Not yet due on reporting date 39 120 -13 39 107 36 007 -21 35 986

Less than 30 days past due 3 837 -13 3 824 4 100 -22 4 078

Between 31 and 120 days past due 1 523 60 1 583 600 -8 592

Between 120 days and 1 year past due 718 -626 92 695 -574 121

Over 1 year past due 1 142 -910 232 1 196 -1 030 166

TOTAL 46 340 -1 502 44 838 42 598 -1 655 40 943

Ageing of the non-current and current trade receivables and other assets

Movement in the allowance for impairment of trade receivables

IN ’000 € 2015 2016

BALANCE AT END OF PREVIOUS PERIOD -1 772 -1 502

Recognized impairments -449 -580

Utilized impairments 10 297

Reversed impairments 709 125

Effect of exchange rate fluctuations 5

BALANCE AT END OF CURRENT PERIOD -1 502 -1 655


The various components of equity as well as the changes between 31 December 2016 and 31 December 2015 are set out in the consolidated statement of changes in equity.

Share capitalThe Company’s share capital at 31 December 2016 was € 19.0 million (2015: € 19.0 million), represented by 27 365 197 ordinary shares without nominal value (2015: 27 365 197 shares). All shares are paid up in full. The share premium at 31 December 2016 was € 1.2 million (2015: € 1.2 million). The ordinary shares are entitled to dividend and the holders of these shares are entitled to cast one vote at the Company’s shareholder meetings. The company is compliant with the regulations relating to the dematerialization of bearer shares. The statutory auditor confirmed compliance with article 11 of the Law of 14 December 2005.

Treasury shares reserveOn 19 October 2012 the Extraordinary General Meeting approved another authorization to purchase up to 1 171 301 shares for cancellation. Bearing mind the splitting of each share into five new shares on 1 July 2014, up to 5 856 505 shares can be bought back under this authori-zation. This authorization is valid for a term of five years and can be renewed. No shares were bought back in 2016 (2015: 29 339 – € 1.0 million) and 111 875 treasury shares were sold pursuant to the exercise of options for € 1.5 million (2015: 1 314 370 – € 7.1 million). Otherwise, no shares were cancelled in 2016 (2015: 0 – € 0.0 million).

At 31 December 2016 the Group held 132 346 own shares (2015: 244 221). These shares will be used for the following share option plan.

Hedging reserveThe hedging reserve contains the effective portion of the cumulative net change in the fair value of the cash flow hedges for which the hedged future transaction has not yet occurred.

Translation differencesThe translation differences include all exchange rate differences resulting from the translation of the financial statements of foreign entities.

Share-based payments reserveAt 31 December 2016 no further options were allocated (2015: 111 875 options).

DividendsOn 16 February 2017 a dividend of € 23.7 million was proposed with respect to 2016 (2015: € 21.5 million). Based on the number of shares entitled to dividend at the date of publication of this annual report, this means a gross dividend per share of € 0.87 (2015: € 0.79). This dividend has not yet been approved by the Company’s General Meeting of Shareholders and is therefore not yet recognized in the consolidated financial statements.

17. Equity

16. Cash and cash equivalentsIN ’000 € 2015 2016

Current investments (less than three months) 45 000

Cash at bank and in hand 15 432 44 244

TOTAL 60 432 44 244

Bank overdrafts considered as cash and cash equivalents in the statement of cash flows -44 -34

CASH AND CASH EQUIVALENTS 60 388 44 210

The recognized, utilized and reversed impairments are part of the cost of sales for € -0.2 million (2015: € 0.3 million) and the marketing and selling expenses for € 0.0 million (2015: € -0.0 million).

No impairment allowance was recognized for past due amounts where collection continues to be deemed likely.

For the financial assets other than trade receivables there is no ageing problem.


18. Earnings per shareIN ’000 UNLESS STATED OTHERWISE 2015 2016

PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY 32 255 47 646

Weighted average number of ordinary shares 26 783 27 214

Effect of options 356 35

Weighted average number of diluted shares 27 139 27 249

BASIC EARNINGS PER SHARE (IN €) 1.20 1.75

DILUTED EARNINGS PER SHARE (IN €) 1.19 1.75

BASIC EARNINGS PER SHAREThe calculation of the basic earnings per share is based on the profit of € 47.6 million attributable to the ordinary shareholders (2015: € 32.3 million) and a weighted average number of ordinary shares outstand-ing during the year of 27 214 153 (2015: 26 782 831).

DILUTED EARNINGS PER SHAREThe calculation of the diluted basic earnings per share is based on the profit of € 47.6 million attributable to the ordinary shareholders (2015: € 32.3 million) and a weighted average number of diluted ordinary shares outstanding during the year of 27 249 350 (2015: 27 138 627).

19. Share-based paymentsSHARE OPTION PLANOn 5 November 2007 the Board of Directors approved a Share Option Plan to encourage and reward selected Directors and executives who are able to contribute to the success and to the long-term growth of the Group. Under this Share Option Plan, 277 231 options – or 1 386 155 options after the share split in 2014 – could be granted.

At the Board meeting of 18 December 2007 it was decided to set the exercise price at the average stock market price of the 30 days preceding the offer. The options will expire 10 years after the date of the approval of the plan by the Board of Directors.

The Board of Directors of 25 March 2011 approved the extension of the 2007-2016 Share Option Plan by 34 654, or 173 270 shares after share split impact in 2014, to a total of 311 885 shares, or 1 559 425 shares after impact of the share split in 2014.

At 31 December 2016 there were no allocated options of the Share Option Plan (2015: 111 875). No options were forfeited in 2016 (2015: 0.00). 111 875 options were exer-cised (2015: 1 314 370). The weighted average share price at the time of exercise was € 40.98 (2015: € 35.60). No additional options were granted in 2016 (2015: 0.00).

The General Meeting approved a new share option plan on 11 May 2016. 543 304 options can be allocated under this new share option plan.

It was decided to set the exercise price at the average closing stock price of the Kinepolis share over the 30 days preceding the offer. The options will expire eight years after the date of the approval of the plan by the General Meeting.

This new share option plan was offered to the Chairman of the Board of Directors, Executive Management and eligible management staff of the Company or its subsidiaries on 29 December 2016. At 28 February 2017 a total of 396 500 options were allocated.

In the past the fair value of these share-based payments was estimated when the options were allocated, using a Trinomial (American-type call option) valuation model. For the new share option plan the fair value was determined using the Black-Scholes model.

The expected volatility is based on the historic volatility calculated on the basis of five years.


AMOUNTS IN € UNLESS STATED OTHERWISE 08/2009 08/2010 03/2011 10/2011 10/2014 12/2016 (2)

Fair value of allocated options (1) 1.73 2.50 2.54 2.67 4.25 7.30 / 9.71

Share price at grant date (1) 5.20 8.70 10.43 11.76 27.96 44.19 / 48.29

Exercise price (1) 3.58 7.28 9.44 11.04 25.19 41.55

Expected volatility 41% 39% 41% 29% 19% 23.43% / 23.53%

Original expected term (in years) 6 5 4 5 3 8

Expected dividend growth 10% 10% 10% 10% 2.65% 7.86%

Risk-free interest rate 3.30% 2.55% 3.16% 2.15% 0.72% -0.14%(1) With due consideration for the consequences of the 2014 share split(2) Due to the evolution of the share price during the period of acceptance, two fair values were calculated for the allocated options based on above listed parameters.

AMOUNTS IN € UNLESS STATED OTHERWISE

2015 2016

NUMBER OF OPTIONS

WEIGHTED AVERAGEEXERCISE PRICE

NUMBER OF OPTIONS

WEIGHTED AVERAGEEXERCISE PRICE

OUTSTANDING OPTIONS AT END OF PREVIOUS PERIOD 1 426 245 7.37 111 875 13.53

Options allocated during the year

Options exercised during the year -1 314 370 6.81 -111 875 13.69

Options forfeited during the year

OUTSTANDING OPTIONS AT END OF CURRENT PERIOD 111 875 13.53

Exercisable options at end of current period 91 875 14.07

20. Loans and borrowingsThis note provides information on the Group’s loans and borrowings. For further information on these loans and

borrowings and the Group’s exposure to interest and foreign currency risks, see note 24.

NON-CURRENT LOANS AND BORROWINGS

IN ’000 € 2015 2016

Private placement of bonds 96 000 96 000

Public bond 75 000 75 000

Unguaranteed loans and borrowings with credit institutions 35 651 29 702

Leasing and similar liabilities 9 228 8 180

Transaction costs refinancing -1 879 -1 604

TOTAL 214 000 207 278

The options can be exercised for the first time during the first exercise term, which falls in the fourth calendar year after the year in which the options were offered to the participants, with the exception of the options granted in 2014, which are exercisable in the first year of grant-ing. The options only become unconditional once the other party has been employed for a certain period. The options granted in 2008 can be acquired in tranches of 12.5% per year on each anniversary of the grant date. The options granted in 2009 can be acquired in tranches of 16% per year during the first five years after alloca-

tion, the final tranche of 20% can be acquired in the sixth year after granting. The options granted in 2010 can be permanently acquired in tranches of 20% per year during the first five years after granting. The options granted in March 2011 can be permanently acquired in tranches of 25% per year during the first four years after grant-ing. The options granted in October 2011 are vested in tranches of 20% per year during the five years after their grant date. Of the options granted in 2014, 40% were permanently acquired in 2014 and 60% were permanently acquired in 2015.


In January 2015 the Group concluded a private placement of bonds with institutional investors for € 96 million: € 61.4 million was placed with a term of 7 years and € 34.6 million with a term of 10 years, both at a fixed interest rate.

At 31 December 2016 € 35.7 million (2015: € 41.6 million) of the unguaranteed credit of a total credit agreement of € 156.6 million had been taken up.

The transaction costs for the refinancing in 2012 and 2015 were € -2.8 million and are recognized in the income state-ment over the term of the unguaranteed credit agreement and the public bond. The amount not recognized in the income statement is charged to loans and borrowings.

At the end of 2016 the outstanding Commercial Paper debt was € 0.0 million (2015: € 0.0 million).

Finance lease liabilitiesThe share of the digital projectors that were sold to a third party in 2010 and since then have been leased back in the non-current and current lease debt is € 0.3 million and

€ 0.5 million respectively. Since 2014 no new digital projectors were purchased and leased back.

The lease of the complex in Groningen (the Netherlands), which was acquired in 2014, was classified as a finance lease and recognized in the current and non-current lease liabilities for € 0.4 million (2015: € 0.4 million) and € 7.7 million (2015: € 8.2 million) respectively.

The lease liabilities also include the lease of digital projec-tors from the acquired Wolff Bioscopen group for € 0.1 million (2015: € 0.1 million) non-current and € 0.1 million (2015: €0.1 million) current.

In 2014 new digital projectors and servers were installed in the acquired complexes in Alicante and Madrid (Spain). The related non-current finance lease liabilities were € 0.1 million (2015: € 0.1 million).

For more information about the Group’s financial leases, see notes 11 and 24.

IN ’000 €2015 2016

PAYMENTS INTEREST CHARGES CAPITAL PAYMENTS INTEREST

CHARGES CAPITAL

Less than one year 3 132 -367 2 765 1 348 -301 1 047

Between one and five years 3 939 -1 060 2 879 3 319 -975 2 344

More than five years 7 590 -1 241 6 349 6 859 -1 023 5 836

TOTAL 14 661 -2 668 11 993 11 526 -2 299 9 227

Future minimum lease payments

21. ProvisionsThe provisions primarily concern an unfavorable lease, the reinstatement of land, transformation expenses and a number of disputes.

Unfavorable Almere lease A € 4.7 million provision was recognized with regard to the unfavorable lease on the Utopolis cinema complex in Almere (the Netherlands) in 2015 (see note 10). At 31 December 2016 the provision was € 4.2 million.

Site restorationThe Brussels (Belgium) cinema complex’s lease on the land owned by the City of Brussels ends in 2025. The Company has a contractual obligation to restore the land to its original state.

At 31 December 2016 the provision for the demolition of the building and the reinstatement of the land to its original state was € 1.2 million (2015: € 1.2 million).

CURRENT LOANS AND BORROWINGS

IN ’000 € 2015 2016

Lease and similar liabilities 2 765 1 047

Other loans and borrowings 5 949 5 949

TOTAL 8 714 6 996


IN ’000 € 2015 2016

BALANCE AT END OF PREVIOUS PERIOD 3 107 7 914

Additions of provisions 479 1 190

Discounting of provisions 38 38

Use of provisions -256 -944

Reversal of provisions -322 -168

Provisions from business combinations 4 868


Balance at end of current period (non-current) 7 161 6 664

Balance at end of current period (current) 753 1 366

TOTAL 7 914 8 030

22. Trade and other payablesNON-CURRENT OTHER PAYABLES

IN ’000 € 2015 2016

Other payables 10 124 9 174

TOTAL 10 124 9 174

The non-current other payables primarily comprise the government grants that can be claimed from the CNC in France based on the number of visitors, as well as the contingent considerations.

These government grants of € 7.4 million (2015: € 8.1 million) are recognized as other operating income in line with the depreciation of the assets for which these grants were obtained.

At the time of the acquisition of the Wolff Bioscopen group, a number of contingent considerations were stipulated in the contract. At 31 December 2016 the fair value hereof was € 1.1 million (2015: € 1.3 million in current other payables). For more information about this, see notes 10 and 24.

CURRENT TRADE AND OTHER PAYABLES

IN ’000 € 2015 2016

Trade payables 64 711 68 384

Employee benefits liabilities 9 276 9 004

Accrued charges and deferred income 6 160 5 830

Taxes payable, other than income taxes 5 456 5 292

Tax shelter liabilities 760

Other payables 603 2 143

TOTAL 86 966 90 653

TransformationOn 31 December 2016 the provisions for the transformation of the organization were € 1.1 million (2015: € 0.7 million). In 2016 new transformation provisions were set up for € 0.8 million (2015: € 0.4 million). The use of that was € 0.3 million (2015: € 0.1 million). € 0.1 million was reversed (2015: € 0.3 million). There was no addition to the consolida-tion scope in 2016 (2015: 0.1 million).

DisputesAt 31 December 2016 the provision for disputes was € 0.9 million. When these provisions will be used or reversed depends on the outcome of the legal disputes concerned and is thus uncertain.

Accrued charges and deferred income At 31 December 2016 the accrued interest expenses with respect to the public and private bonds issued were

€ 5.2 million (2015: € 5.2 million). The deferred income was € 0.6 million (2015: € 0.9 million).


24. Risk management and financial instrumentsRISK MANAGEMENT

Financial risk managementThe Group’s principal financial instruments are bank loans, private and public bonds, finance leases and cash.

The Group has various other financial instruments such as trade and other receivables and payables, which arise directly from its operations.

The Group also enters into derivative financial instruments, primarily forward rate agreements, interest rate swaps and foreign exchange forwards. The purpose is to manage the interest rate and foreign currency risks arising from the Group’s activities and its sources of financing.

The main risks arising from the Group’s financial instru-ments are interest rate risk, liquidity risk, foreign currency risk and credit risk. It is Group policy to negotiate the terms of the derivative financial instruments to match the terms of the hedged item so as to maximize hedge effectiveness.

It is Group policy not to undertake any trading positions in derivative financial instruments.

The Board of Directors investigates and approves policies for managing each of these risks. These policies are summarized below. The accounting treatment of the derivative financial instruments is included in the account-ing policies.

Interest rate riskThe Group’s exposure to market risk for changes in interest rates primarily relates to the Group’s current and non-current loans and borrowings.

Group policy is to manage interest rate expenses with a mixture of fixed and variable interest rate liabilities. To manage this mix in a cost-efficient manner, the Group enters into:

★ Interest rate swaps and forward rate agreements in which the Group agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to a pre-agreed principal amount;

★ Interest rate derivatives with fixed ceilings, hence limiting the impact of interest rate movements.

At the balance sheet date the Group had a few interest rate swaps outstanding, on which the Group receives a variable interest rate equal to EURIBOR and pays a fixed interest rate. These swaps are used to cover the variability in the cash flows of the underlying loans. These interest rate swaps are determined as cash flow hedges in accordance with the IAS 39 hedge accounting. Therefore the effective portion of the change in fair value of the interest rate swap, which can be considered to be an effective hedge, is recognized directly in equity. The total changes in fair value of the interest rate swaps before deferred tax recognized in equity resulted in a decrease in equity of € 0.3 million at 31 December 2016 (2015: no outstanding interest rate swap agreements).

23. Current tax liabilities

The current tax liabilities have fallen from € 20.0 million to € 12.2 million, primarily due to the partial payment

(€ 6.3 million) of the EPR of € 9.4 million (see note 8). Large prepayments were also made.

IN ’000 € 2015 2016

Belgian Excess Profit Ruling (EPR) tax 9 355 3 088

Current tax liability 10 681 9 094

TOTAL 20 036 12 182


1 EURO CORRESPONDS TO:

CLOSING RATE 31/12/2016

AVERAGE RATE 2016

THEORETICAL VOLATILITY

POSSIBLE CLOSING RATE 31/12/2016

POSSIBLE AVERAGE RATE 2016

Polish Zloty 4,4240 4,3632 20% 3.54 - 5.31 3.49 - 5.24

Swiss Franc 1,0739 1,0902 20% 0.86 - 1.29 0.87 - 1.31

Foreign currency risk sensitivity analysis

Derivatives can be used at any time to hedge this risk.

The Group’s sales denominated in currencies other than the functional currency are limited. The purchases of the Group’s subsidiaries primarily concern the purchase of materials by the Group in US Dollar and to a lesser extend the guarantee obligations in US Dollar entered into by Kinepolis Film Distribution NV towards Dutch Filmworks BV. At 31 December 2016 the Group had no outstanding foreign exchange forward contracts (2015: $ 2.0 million) for the purposes of hedging this risk.

Loans between Kinepolis Financial Services NV and other Group companies are expressed in the currency of the latter. Foreign exchange results regarding the non-current loans in Swiss Franc and Polish Złoty of Kinepolis Financial Services NV to Kinepolis Schweiz AG and Kinepolis Poznań Sp.z o.o. are recognized in other comprehensive income, because these loans are considered to be part of the Group’s net investment in these foreign entities. The following foreign exchange rate results were recognized directly in equity:

IN ’000 € 2015 2016

Polish Zloty -1 284 -1 569

Swiss Franc 1 480 1 581

TOTAL 196 12

The Group also incurs a foreign currency risk from consoli-dating foreign companies not having the Euro as their functional currency (Switzerland and Poland). This transla-tion risk is not hedged.

The Group pursues a conservative financial policy and since 2008 to hedge interest risk uses only derivative financial instruments of which movements in fair value are offset directly against equity and have no impact on the income statement (hedge accounting).

At 31 December 2016, after taking into account the effect of the interest rate swaps, 100% of the Group’s borrowings were recognized at a fixed interest rate (2015: 82% at a fixed interest rate).

Interest rate risk sensitivity analysisThe interest-bearing loans at the balance sheet date were € 214.3 million (2015: € 222.8 million). € 35.7 million or 16% of the interest-bearing loans have a variable interest rate, without taking into account the effect of the interest rate swaps (2015: € 41.6 million or 18%).

Total interest charged to the income statement in 2016 was € 7.2 million (2015: € 7.1 million).

At the beginning of 2016 the loan of € 41.6 million with variable interest was fixed with an interest rate swap.

Foreign currency riskThe Group has a foreign currency risk on positions deriving from sales or purchases and from outstanding borrowings with Group companies in currencies other than the func-tional currency (Euro) (transaction risk).

Group policy is focused on minimizing the impact of exchange rate fluctuations on profit or loss.

The above table states the possible changes in the exchange rate for the Polish Zloty and the Swiss Franc against the Euro, estimated on the basis of the theoretical volatility.

If, at the balance sheet date, the Polish Złoty and the Swiss Franc had strengthened/weakened as indicated above, and all other variables being constant, the profit would have

been € 0.6 million lower (2015: € 0.4 million lower) or € 0.4 million higher (2015: € 0.3 million higher) in 2016 and equity at the end of 2016 would have been € 4.7 million higher or € 3.2 million lower (2015: € 4.8 million higher or € 3.2 million lower).


Capital managementBoard of Directors’ policy is aimed at maintaining a strong capital position in order to retain the confidence of investors, lenders and markets and to safeguard the future development of the business activities. The Board of Directors monitors the return on equity, which is defined by the Group as the operating profit divided by equity, excluding non-controlling interests. The Board of Directors also monitors the level of the dividend payable to the shareholders.

The Board of Directors seeks a balance between, on the one hand, the higher return that is potentially available with a higher level of borrowing, and, on the other hand, the benefits and security of a solid equity position. In seeking this balance, the Board of Directors’ objective is to achieve the pre-defined level of the net financial debt to EBITDA and net financial debt to equity ratios.

Up to 2009 own shares were purchased by means of a share buyback program through a financial institution operating under a discretionary mandate. These 277 231 shares are held to cover the Group’s current share option plan, which runs until 2017 but for which all allocated options were taken up in 2016.

The Board of Directors takes decisions with regard to the purchase of treasury shares for each specific transaction.

The Board of Directors believed that the ratios of net financial debt to equity and net financial debt to EBITDA were at risk of becoming too low as from mid 2010 and therefore proposed to the General Meeting the reduction of share capital and the purchase of treasury shares to improve the ratios and thus create shareholder value. After approval by the Extraordinary General Meeting of 20 May 2011, the capital was reduced by € 30.0 million and 395 502 shares were bought back in 2011: 34 654 to cover new options and the remainder for cancellation. 349 423 shares were cancelled in 2011. In accordance with the authorization of the Board of Directors by the Extraordinary General Meeting of 20 May 2011, an additional 713 422 shares were purchased and 724 847 shares were cancelled in 2012.

On 19 October 2012 the Extraordinary General Shareholder’s Meeting approved another authorization to purchase up to 1 171 301 own shares for cancellation, subject to certain circumstances. This authorization is valid for a term of five years and can be renewed. Under the

Credit riskThe credit risk with respect to trade receivables is the risk of financial loss the Group is exposed to if a customer fails to meet its contractual obligations. It is Group policy that all customers who wish to trade on credit terms are sub-ject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis. The Group accounts for impairment losses in the amount of the esti-mated losses in relation to trade receivables. This concerns partly specific and partly general loss provisions that are set up as soon as receivables are more than 60 days over-due, unless their collection is still deemed to be likely.

With respect to the credit risk arising from the other financial assets of the Group, including cash and cash equivalents, available-for-sale financial assets and certain derivative instruments, the Group’s exposure to credit risk consists of the counterparty default risk, with a maximum exposure equal to the carrying amount of these instruments.

There are no significant concentrations of credit risk within the Group. The Group has no clients that account for more than 10% of revenue.

The Group believes that all financial assets for which no impairment losses have been recognized can be collected in full, based on historical payment patterns and a thorough evaluation of the credit risk.

The extent of the Group’s credit risk exposure is repre-sented by the aggregate balance of the financial assets. The maximum nominal credit risk in the event that all parties were to fail to meet their obligations was € 82.6 million at 31 December 2016 (2015: € 103.4 million).

Liquidity riskThe Group’s goal is to ensure that there is sufficient financing for the long term. The financing need is deter-mined on the basis of the strategic long-term plan. Various credit forms are used, including bonds, credit lines, bank loans and financial leases, to guarantee the continuity and flexibility of the financing. The Group’s liquidity is managed through the in-house bank, Kinepolis Financial Services NV. The Group’s financing objective is to align the term of its credit lines with the timing of the assumed liabilities relating to the expansion.


new authorization, a new share buy-back program was launched in 2013 to buy back 300 000 shares. 276 492 shares were bought back in 2013.

On 18 December 2013 the Board of Directors decided to cancel 273 854 shares.

On 16 May 2014 the Extraordinary General Meeting decided to split the Group’s 5 582 654 shares into five on 1 July 2014. Taking into account the share split, 604 710 shares were bought back in 2014.

On 18 December 2014 the Board of Directors decided to cancel 548 073 shares. Therefore, the Group’s share capital at 31 December 2014 was represented by 27 365 197 ordinary shares without nominal value. The number of regular shares remained unchanged in 2015.

At the end of 2015 the Group held 244 221 treasury shares: 29 339 shares were bought back in 2015 and 1 314 370 treasury shares were used to exercise options.

At the end of 2016 the Group held 132 346 treasury shares. No shares were bought back in 2016. 111 875 treasury shares were used to exercise options. The other treasury shares will be used for the following option plan.

FINANCIAL INSTRUMENTS

Debt portfolioIn January 2015 the Group concluded a private placement of bonds with institutional investors for € 96.0 million: € 61.4million was placed with a term of 7 years and € 34.6 million with a term of 10 years. A fixed annual gross interest is paid on both bonds. This private placement complies with the Group’s financial strategy and serves to support the expansion, by increasing the diversification of the sources of financing and by refinancing the existing credits.

The Group also issued a non-subordinated bond for € 75.0 million in Belgium on 6 March 2012. The bonds mature in seven years and have a fixed annual gross interest of 4.75%. On 12 May 2015 Kinepolis Group NV announced the launch of an unconditional public exchange offer on all outstanding € 75.0 million fixed interest bonds with a gross interest of 4.75% and a maturity date of 6 March 2019. Holders of the existing bonds had the opportunity to exchange their existing bonds for new

bonds to be issued by Kinepolis Group NV with a nominal value of € 1 000, gross nominal interest of 4.0% per year and a term of 8 years, with maturity date on 9 June 2023 (the ‘New Bonds’). Bonds for a total value of € 15.9 million were exchanged.

On 15 February 2012, within the framework of the refinancing of its existing syndicated credit and the financing of the further general development of the Group, Kinepolis Group NV signed a € 90.0 million credit agreement with ING Belgium, KBC Bank and BNP Paribas Fortis until 31 March 2017 (roll-over credit). At the end of June 2015 this existing credit facility was renewed with the bank consortium for the full term until the end of June 2020. This credit facility was revised in December 2015 in response to the Utopolis acquisition and expanded with a fixed-term loan of 7 years with annual repayments. At 31 December 2016 € 35.7 million had been taken up (2015: € 41.6 million). In May 2016 the term of the existing credit agreement for € 90.0 million was extended by one year to June 2021.

No securities were provided. Only a number of conditions apply with regard to the sale or provision as security of certain of the Group’s assets to a third party. This agreement contains certain financial covenants, including a maximum leverage ratio of 3.5, a minimum interest coverage of 4.5 and a minimum solvency ratio of 20%, as well as a number of potentially restrictive undertak-ings limiting or preventing specific business transactions. All these covenants were met in 2016, as they were in 2015.

The interest payable on the credit agreement is calculated on the basis of the EURIBOR applicable to the selected borrowing period plus the negotiated margin.

In late 2010 a sale and leaseback agreement was concluded for an amount up to € 17.5 million. Under this agreement Kinepolis sells tangible fixed assets and leases them back for a term of six years. This facility provides an additional alternative to long-term bank financing. At 31 December 2016 € 0.9 million was outstanding (2015: € 3.1 million). These lease liabilities are guaranteed by the leased assets. The payable interest is calculated on the basis of a fixed interest rate determined as a weighted average of the BPR over 1 up to 6 years, increased by the negotiated margin.


IN ’000 €2016

< 1 YEAR 1-5 YEARS > 5 YEARS TOTAL

Private placement of bonds 2 743 10 974 102 001 115 718

Bond 3 443 67 279 17 148 87 871


Loans and borrowings with credit institutions 6 462 24 992 5 992 37 446

Lease liabilities 1 353 3 320 6 861 11 533

Contingent considerations 1 070 1 070

Third party current account payables 43 43


Non-derivative financial liabilities 82 462 107 635 132 002 322 099

Interest rate swaps 333 333

Subtotal derivative financial instruments 333 333

TOTAL 82 795 107 635 132 002 322 432

Financial liabilities – contractual cash flows The following table gives an overview of the contractual

Within the framework of the acquisition of the Wolff Bioscopen group in 2014, the lease of the complex in Groningen (the Netherlands) was renegotiated for a period of 17 years and classified as a finance lease (see note 11).

The lease debt at the commencement of the new contract was determined by discounting the future rental payments of the Group on the basis of the marginal interest rate of the Group, as the implicit interest rate of the lease was not available. At 31 December 2016 this debt was € 8.2 million (2015: € 8.6 million).

The projectors of the Wolff Bioscopen group acquired in 2014 were sold to a third party in 2011 and leased back for a period of up to 10 years. The carrying amount of this lease debt was € 0.1 million at 31 December 2016 (2015: € 0.2 million).

In 2014 new projectors were leased in the acquired Spanish complexes from a third party for a period of up to 10 years. The lease debt in question was € 0.1 million at 31 December 2016 (2015: € 0.1 million).

For more information about the three aforementioned leases, see notes 11 and 20.

maturities for the financial liabilities at 31 December 2016, including the estimated interest payments:


Hedging activities The Group uses derivative financial instruments to hedge the interest rate risk. All derivative financial instruments are measured at fair value. The following table gives the remain-

ing term of the outstanding derivative financial instruments at closing date. The amounts given in this table are the notional amounts.

IN ’000 €2015


Foreign currency

Foreign exchange forward contracts 2 000 2 000

IN ’000 €2016


Interest rate swaps 5 949 23 796 5 906 35 651

TOTAL 5 949 23 796 5 906 35 651

Fair valueFair value is the amount at which an asset can be traded or a liability settled in an orderly transaction between well-in-formed, willing parties, following the ‘arm’s length’ principle.

The following table discloses the clean fair value and the carrying amount of the main interest-bearing financial loans and borrowings (measured at amortized cost).

IN ’000 €2015 2016

TOTAL < 1 YEAR TOTAL < 1 YEAR


Bank overdrafts 43 43 34 34

TOTAL 41 643 5 992 35 685 5 983

In respect of interest-bearing loans and borrowings with a variable interest rate, the following table shows the periods in which they reprice.

IN ’000 €2015


Private placement of bonds 2 744 10 973 104 744 118 461

Bond 3 443 70 087 17 783 91 313



Lease liabilities 3 131 3 943 7 590 14 664

Contingent considerations 1 289 1 289

Tax shelter liabilities 760 760


Third party current account payables 43 43

Non-derivative financial liabilities 81 423 111 627 142 225 335 275

Foreign exchange forward contracts

- Outflow 1 764 1 764

- Inflow -1 837 -1 837

Derivative financial liabilities -73 -73

TOTAL 81 350 111 627 142 225 335 202


IN ’000 €2015 2016

CARRYING AMOUNT FAIR VALUE CARRYING

AMOUNT FAIR VALUE

Private placement of bonds – fixed interest rate 96 000 100 368 96 000 105 113

Public bond – fixed interest rate 75 000 81 622 75 000 82 340

Interest-bearing loans – variable interest rate 41 600 41 600 35 651 35 651

Lease liabilities – fixed interest rate 11 993 12 157 9 228 11 570

Bank overdrafts 43 43 34 34

Transaction costs refinancing -1 879 -1 879 -1 605 -1 605

TOTAL 222 757 233 911 214 308 233 103

The fair value of the public bond with fixed interest rate (Level 2) was measured by discounting the future cash flows based on an interest rate of 1.43% (2015: 2.20%) for the part of the bond with a maturity date in 2019 and 2.4% for the part of the bond with a maturity date in 2023 (2015: 3.18%).

The fair value of the private bond with fixed interest rate (Level 2) was measured by discounting the future cash flows based on an interest rate of 1.73% (2015: 2.53%) for the bond with a term of 7 years and 1.19% (2015: 1.94%) for the part of the bond with a term of 10 years.

An interest rate of 1.86% for the leased projectors and 3.25% for the leased complex in Groningen (the Netherlands) was used to measure the fair value of the lease liabilities

(Level 2) by discounting the future cash flows (2015: 2.09% for the leased projectors; 3.18% for the leased complex).

The fair value of the other non-derivative financial assets (loans and receivables) and liabilities (measured at amortized cost) is equal to the carrying amount.

The following table gives the nominal or contractual amounts and the clean fair value of all outstanding derivative financial instruments (cash flow hedging instruments). The nominal or contractual amounts reflect the volume of the derivative financial instruments out-standing at the balance sheet date. As such they represent the Group’s risk on these transactions.

IN ’000 € UNLESS STATED OTHERWISE2015 2016

NOMINAL VALUE IN ’000 $

FAIR VALUE

NOMINAL VALUE IN ’000

FAIR VALUE

Interest rate swap 35 651 -333

Foreign currency

Foreign exchange forward contracts 2 000 64

TOTAL 2 000 64 35 651 -333

The fair value of financial instruments related to the interest rate is determined by discounting the expected future cash flows based on current market interest rates and the interest rate curve for the remaining life of the investment. At 31 December 2016 there were no out-standing foreign exchange forward contracts. The fair

value of foreign exchange forward contracts is calculated as the discounted value of the difference between the value of these contracts based on the exchange rate at the balance sheet date and the contract value based on the forward exchange rates at the same date.

The fair value of the derivative financial instruments is included in the Group’s statement of financial position as follows:

IN ’000 €2015 2016

ASSETS LIABILITIES NET VALUE ASSETS LIABILITIES NET VALUE

Non-current 333 -333

Current 64 64

TOTAL 64 64 333 -333


Level 3 fair value The following table shows the reconciliation between the opening and closing balance for the level 3 fair value:

IN ’000 € CONTINGENT CONSIDERATIONS

BALANCE AT END OF PREVIOUS PERIOD 1 289

Paid consideration -219

BALANCE AT END OF CURRENT PERIOD 1 070

IN ’000 €2014 2015 2016

LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 1 LEVEL 2 LEVEL 3

Cash flow hedging – Currency

Foreign exchange forward contracts 27 64

Interest rate swaps -333Finance liabilities measured at fair value Contingent considerations 4 159 1 289 1 070

TOTAL 27 4 159 64 1 289 -333 1 070

€ 0.2 million was paid to the former shareholders of the Wolff Bioscopen group after a guaranteed was obtained that operations at Cinerama Rotterdam would continue until at least 31 May 2017.

Level 3 fair value sensitivity analysisThe possible change in the significant non-observable output stated below could reasonably have the following impact on the fair value of the contingent considerations at balance sheet date:

At 31 December 2016 the fair value of the contingent considerations was € 1.1 million (2015: € 1.3 million). This amount was determined on the basis of the following assumptions:

★ The number of visitors of the new future complex in Utrecht (the Netherlands) in the third year after opening.

The non-observable significant input is the number of visitors to the Group’s future new-build project in Utrecht (the Netherlands). The estimated fair value will increase or decrease depending on whether the number of visitors to the new complex in Utrecht is higher or lower.

Fair value hierarchyThe table below provides an overview of the financial instruments carried at fair value by valuation method. The different levels have been defined as follows:

★ Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

★ Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

★ Level 3: inputs for the asset or liability that are not based on observable market data (unobservable input).

IN ’000 € 2015 2016

10% increase in the projected number of visitors of the future complex in Utrecht (the Netherlands) 535 535

10% decrease in the projected number of visitors of the future complex in Utrecht (the Netherlands). -535 -535


The complex in Valencia (Spain) is leased for a period of 40 years since May 2001. There is an option to terminate the contract after 20 years. The contract does not provide for a purchase option.

The Group also leases the complex in the centre of Nîmes (France) and a complex in the centre of Liège (Belgium). The term of these leases is nine years (renewable). A fixed rent is always charged.

The Group also leases the land on which a number of complexes have been built and the adjacent car park for a remaining period of 9 years (renewable) in Belgium, 20 years in Luxembourg, and 34 and 47 years in France (long lease construction). The paid rent is partly fixed and partly variable, based on the number of tickets sold. This variable rent was € 0.2 million in 2016 (2015: € 0.2 million).

A number of car parks are also leased in Belgium for a term of 1 to 27 years (renewable). A fixed rent is always charged.

The Group also leases office space in Belgium for a remaining period of three years (renewable). The rent is always fixed.

All buildings housing Dutch entities of the Group, which were acquired in 2014, except for the building in Enschede (the Netherlands), are leased. Except for the rent on the building in Groningen (the Netherlands) these are all operating leases. The contracts have a term of 1 to 10 years (renewable). The rent is always fixed.

The complexes in Spain (Alicante and Madrid) acquired in 2014 are leased for a period of 10 years (renewable for two periods of 5 years; can be cancelled by the tenant

if the number of visitors falls below a given threshold) and 20 years (not renewable; can be cancelled by the tenant after 10 and 15 years) respectively. The paid rent is partly fixed and partly variable, based on the number of paying visitors. This variable rent was € 0.1 million in 2016 (2015: € 0.4 million).

Part of the complexes acquired in the Netherlands in 2015 (Oss, Zoetermeer and Emmen) are owned by the Group. The cinema complexes in Almere and Den Helder are leased for a remaining term of 13 and 5 years respectively. The rent is always fixed. The acquired cinema complexes in Luxem-bourg, with the exception of the complex in Kirchberg, are leased with a remaining term of 4 and 9 years. The rent is always fixed.

The cinema in Rouen (France) acquired in 2016 is leased for a term of 10 years (renewable). The rent is partly fixed and partly variable, based on the number of tickets sold. No variable rent was paid in 2016. The newly opened cinema complex in the Nevada shopping center in Granada (Spain) is leased for a term of 20 years (renewable for a term of five years). The rent is always fixed.

Lastly, the Group leases cars for some of its employees. These contracts have a term of 3 to 5 years (sometimes renewable). All lease sums are fixed.

Leases as lessorThe Group has leased out parts of its property under operating leases. The future minimum lease payments under non-cancellable leases are as follows:

25. Operating leasesLeases as LesseeNon-cancellable operating lease rentals are payable as follows:

IN ’000 € 2015 2016

Less than one year 7 981 8 655

Between one and five years 23 969 25 764

More than five years 16 163 26 447

TOTAL 48 113 60 866

Minimum lease payments in the income statement with regard to operating leases 6 960 8 414

Contingent lease payments in the income statement with regard to operating leases 575 362


IN ’000 € 2015 2016

Less than one year 6 613 7 802

Between one and five years 10 326 14 997

More than five years 1 177 8 133

TOTAL 18 116 30 932

Minimum lease payments in the income statement with regard to operating leases 7 007 8 031

Contingent lease payments in the income statement with regard to operating leases 529 973

The leases as lessor primarily concern the multiplex in Poznań (Poland) leased to Cinema City since January 2007 for a term of 10 years (renewable by 5 years). The rent consists of a fixed and a variable portion, the latter is expressed as a percentage of Box office revenue. This variable rent was € 0.3 million in 2016 (2015: € 0.1 million).

Since 2014 the Group leases the Toison d’Or cinema in Brussels (Belgium) to UGC. This is a contract with a term of 18 years (renewable twice for 9 years). The rent consists of a fixed and a variable portion. The variable part is determined on the basis of the number of visitors. Variable rent of € 0.0 million was charged in 2016 (2015: € 0.0 million).

The Group also leases part of its complexes to third parties for the exploitation of shops or cafes. These concessions have a term of 1 to 36 years (renewable).

Finally, the car parks of a number of complexes are leased for a period of 1 to 15 years (renewable) in Belgium and for an indefinite term in Poland. A fixed rent is charged for part of these car parks. The revenue from the other car parks is variable, based on the number of sold parking tickets, adjusted for management expenses.

27. ContingenciesKFDAt the end of 2016 the Group had contingencies for € 2.5 million (2015: € 1.1 million). These are primarily minimum guarantee commitments of Kinepolis Film Distribution NV

toward Dutch Filmworks BV for films that were not yet released, but for which contractual obligations already exist.

26. Capital commitmentsAt the end of 2016 the Group had material capital commitments for € 6.2 million (2015: € 24.3 million). These are commitments with regard to the construction of new cinemas

in Utrecht and ’s-Hertogenbosch in the Netherlands, the construction of the complexes in France and the development of a new front office software for the Group.


29. Subsequent eventsKinepolis builds new complex in ’s-Hertogenbosch Kinepolis Group has obtained all necessary permits to begin construction of a new complex in ’s-Hertogenbosch (the Netherlands). The cinema will be built in the Paleiskwartier district and will have seven screens, with around 1 000 seats in total. Paleiskwartier is an inner-city district currently under development next to ’s-Hertogen-bosch central train station.

The cinema will be nestled among offices, apartments, a supermarket and a restaurant. Kinepolis targets 350 000 visitors per year in Den Bosch.

Construction began in March 2017 and the cinema is set to open in the spring of 2018. This is the Group’s fourth Dutch new build project and the second Kinepolis complex in the province of North Brabant after Kinepolis Breda.

28. Related partiesThe transactions between the Group and its subsidiaries were eliminated in the consolidation and are accordingly not

included in this note. The transactions with other related parties are explained below.

Remuneration of the Directors and executive officers

IN ’000 € 2015 2016

Directors

Remuneration 366 387

Executive officers (CEOs)

Short-term employee benefits 1 483 1 633

Share-based payments 44

Group insurance 10 10

TOTAL 1 903 2 030

The CEOs of the Group and the Chairman of the Board of Directors took part in the 2007-2016 Group Share Option Plan (Incentive Plan) (see Note 19) (1 039 620 options (after impact of the share split) in 2014). In 2015 all options in the share option plan provided for them were exercised. For more information, see the remuneration report in the Corporate Governance Statement.

Transactions with other related partiesKinohold BIS SA provides certain administrative services to the Group, charging a market rate of € 0.4 million in 2016 (2015: € 0.4 million).

Pentascoop NV provides a number of maintenance and transport services to the Group, charging a market rate of € 0.2 million in 2016 (2015: € 0.6 million). € 0.1 million had not yet been paid at the end of the year (2015: paid in full).


30. Mandates and remuneration of the statutory auditorThe statutory auditor for the Company is KPMG Bedrijfsrevisoren, represented by Mr. S. Cosijns.

For the entire Group, the mandates and remuneration can be summarized as follows:

IN ’000 € 2015 2016

Remuneration of the statutory auditor 296 287

Other audit-related services 19 49

Tax services

Other 20 13Remuneration for other services or assignments performed within the Company and its subsidiaries by the statutory auditor 39 62

Remuneration for persons associated to the statutory auditor for the performance of a mandate as statutory auditor 138 304

Other audit-related services 8

Tax services 60 33

Other 76Remuneration for other services or assignments performed within the Company and its subsidiaries by persons associated to the statutory auditor 68 109

TOTAL 541 761


31. Group entitiesList of fully consolidated companies

COUNTRY NAME MUNICIPALITY VAT OR ENTERPRISE NUMBER % 2015 % 2016

Belgium Brightfish NV Brussels BE 0450 523 725 100 100

Kinepolis Braine SA Braine-L'alleud BE 0462 688 911 100 100

Kinepolis Film Distribution (KFD) NV Brussels BE 0445 372 530 100 100

Kinepolis Financial Services NV Brussels BE 0886 547 831 100 100

Kinepolis Group NV Brussels BE 0415 928 179 100 100

Kinepolis Immo Hasselt NV Hasselt BE 0455 729 358 100 100

Kinepolis Immo Multi NV Brussels BE 0877 736 370 100 100

Kinepolis Liège NV Hasselt BE 0459 469 796 100 100

Kinepolis Mega NV Brussels BE 0430 277 746 100 100

Kinepolis Multi NV Kortrijk BE 0434 861 589 100 100

KP Immo Brussel NV Brussels BE 0816 884 015 100 100

The Belux Booking Cie BVBA Mechelen BE 0826 444 948 100 -

Utopia Belgium NV Brussels BE 0466 339 772 - 100

France Eden Panorama SA Lomme FR 02340483221 100 100

Forum Kinepolis SA Nîmes FR 86421038548 100 100

Kinepolis Bourgoin SA Bourgoin-Jallieu FR 65779487297 100 100

Kinepolis France SA Lomme FR 20399716083 100 100

Kinepolis Film Distribution France SAS Lomme FR 43789848280 100 100

Kinepolis Immo St.Julien-lès-Metz SAS Metz FR 51398364463 100 100

Kinepolis Immo Thionville SA Thionville FR 10419162672 100 100

Kinepolis Le Château du Cinéma SAS Lomme FR 60387674484 100 100

Kinepolis Mulhouse SA Mulhouse FR 18404141384 100 100

Kinepolis Nancy SAS Nancy FR 00428192819 100 100

Kinepolis Prospection SAS Lomme FR 45428192058 100 100

Kinepolis St. Julien-lès-Metz SA Metz FR 43398364331 100 100

Kinepolis Thionville SA Thionville FR 09419251459 100 100

Utopolis Longwy SAS Longwy FR 21432763563 100 100

Luxembourg Utopolis Belval SA Luxembourg LU 220 75 333 100 100

Majestiek International SA Luxembourg LU 19942206638 100 100

Utopia SA Luxembourg LU 160 90 380 100 100

Netherlands Kinepolis Booking NL BV Utrecht NL 822229936B01 100 -

Kinepolis Immo BV Utrecht NL 003182794B01 100 100

Kinepolis Rotterdam BV Utrecht NL 808810261B01 100 100

Kinepolis Beheermaatschappij BV Utrecht NL 007081698B01 100 -

Kinepolis Bioscopen Holding BV Utrecht NL 822624382B01 100 100

Kinepolis Enschede BV Utrecht NL 808883574B01 100 100

Kinepolis Groningen BV Utrecht NL 816165774B01 100 100

Kinepolis Huizen BV Utrecht NL 820697230B01 100 100

Kinepolis Exploitatie BV Utrecht NL 819683036B01 100 100

Kinepolis Participatie BV Utrecht NL 822624357B01 100 -

Utopia Nederland Beheer BV Almere NL 804687237B02 100 -

Utopia Nederland Vastgoed BV Almere NL 804687237B05 100 100

Utopia Nederland BV Almere NL 804687237B03 100 100

Utrechtse Film Onderneming ‘Ufio’ BV Utrecht NL 003182812B01 100 100


CHANGES IN THE CONSOLIDATION SCOPE

New participating interests in subsidiariesOn 25 March 2016 the Belgian Competition Authority (BCA) approved the acquisition of the Belgian Utopolis cinemas by Kinepolis Group, on the condition that the complexes in Mechelen and Aarschot are sold with a view to their continued operation.

After this decision Kinepolis acquired the Belgian Utopolis cinemas in Lommel, Turnhout, Mechelen and Aarschot on 14 April 2016 under the agreement signed on 9 November 2015 with the shareholders of Utopia SA.

On 30 September 2016 Kinepolis Group NV sold the four Belgian Utopolis cinemas in Aarschot, Lommel, Mechelen and Turnhout to the French group UGC. As a result of this sale, only Utopia Belgium NV remains within the consolida-tion scope.

OtherThe Belux Booking Cie BVBA was liquidated on 16 December 2016.

MergersThe following companies merged with Kinepolis Bioscopen Holding BV on 22 December 2016.

★ Kinepolis Booking NL BV ★ Kinepolis Beheersmaatschappij BV ★ Kinepolis Participatie BV ★ Utopia Nederland Beheer BV

COUNTRY NAME MUNICIPALITY VAT OR ENTERPRISE NUMBER % 2015 % 2016

Poland Kinepolis Poznan S.p.z. o.o. Poznan NIP 5252129575 100 100

Spain Kine Invest SA Pozuelo de Alarcon ESA 824 896 59 100 100

Kinepolis España SA Pozuelo de Alarcon ESA 814 870 27 100 100

Kinepolis Granada SA Pozuelo de Alarcon ESA 828 149 55 100 100

Kinepolis Jerez SA Pozuelo de Alarcon ESA 828 149 22 100 100

Kinepolis Madrid SA Pozuelo de Alarcon ESA 828 149 06 100 100

Kinepolis Paterna SA Pozuelo de Alarcon ESA 828 149 14 100 100

Switzerland Kinepolis Schweiz AG Schaffhausen CH 2903013216-5 100 100


Statutory auditor’s report to the general meeting of Kinepolis Group NV as of and for the year ended 31 December 2016

FREE TRANSLATION OF UNQUALIFIED STATUTORY AUDITOR’S REPORT ORIGINALLY PREPARED IN DUTCH

In accordance with the legal requirements, we report to you in the context of our statutory auditor’s mandate. This report includes our report on the consolidated financial statements as of and for the year ended 31 December 2016, as defined below, as well as our report on other legal and regulatory requirements.

REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS – UNQUALIFIED OPINIONWe have audited the consolidated financial statements of Kinepolis Group NV (“the Company”) and its subsidiaries (jointly “the Group”), prepared in accordance with International Financial Reporting Standards as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium. These consolidated financial statements comprise the consolidated statement of financial position as at 31 December 2016 and the consolidated income statement and the consolidated statements of profit and loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. The total of the consolidated statement of financial position amounts to EUR 503.446.(000) and the consolidated statement of profit or loss and other comprehensive income shows a profit for the year of EUR 46.750.(000).

Board of directors’ responsibility for the preparation of the consolidated financial statementsThe board of directors is responsible for the preparation of these consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium, and for such internal control as the board of directors determines, is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Statutory auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (ISAs) as adopted in Belgium. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the statutory auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error.


In making those risk assessments, the statutory auditor considers internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the board of directors, as well as evaluating the overall presentation of the consolidated financial statements.

We have obtained from the Company’s officials and the board of directors the explanations and information necessary for performing our audit.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our unqualified opinion.

Unqualified opinionIn our opinion, the consolidated financial statements give a true and fair view of the Group’s equity and consolidated financial position as at 31 December 2016 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTSThe board of directors is responsible for the preparation and the content of the annual report on the consolidated financial statements.

In the context of our mandate and in accordance with the Belgian standard which is complementary to the International Standards on Auditing as applicable in Belgium, our responsibility is to verify, in all material respects, compliance with certain legal and regulatory requirements. On this basis, we provide the following additional statement which does not modify the scope of our opinion on the consolidated financial statements:

★ The annual report on the consolidated financial statements includes the information required by law, is consistent with the consolidated financial statements and does not present any material inconsistencies with the information that we became aware of during the performance of our mandate.

Kontich, 29 March 2017

KPMG Réviseurs d’Entreprises / Bedrijfsrevisoren Statutory Auditor represented by

S. Cosijns Réviseur d’Entreprises / Bedrijfsrevisor


Condensed financial statements of Kinepolis Group NV

The following information is an extract from the unconsoli-dated financial statements of Kinepolis Group NV, drawn up in accordance with the Belgian accounting principles. These unconsolidated financial statements, together with the management report to the General Shareholders’ Meeting and the Auditor’s report, will be filed with the National Bank of Belgium within the legal deadline.

It should be noted that only the consolidated financial statements as presented above give a true and fair view of the financial position and performance of Kinepolis Group NV.

Since Kinepolis Group NV is essentially a holding company that accounts for its investments at cost in its unconsolidated statements, these separate financial statements only give a limited view of the financial position of Kinepolis Group NV. Therefore the Board of Directors has deemed it appropriate to present only a condensed unconsolidated balance sheet

and income statement, prepared according to the Belgian accounting principles for the year ended 31 December 2016.

The statutory auditor’s report on these statements is unqualified and confirms that the unconsolidated financial statements of Kinepolis Group NV, prepared in accordance with Belgian accounting principles for the year ending 31 December 2016, give a true and fair view of the financial position of Kinepolis Group NV in accordance with all legal and regulatory provisions.

The unconsolidated financial statements of Kinepolis Group NV can be obtained free of charge from the website of the Nationale Bank van België (www.nbb.be), in section ‘Balanscentrale’, subsection ‘Jaarrekeningen raadplegen’ or requested free of charge from Investor Relations.

CONDENSED UNCONSOLIDATED INCOME STATEMENT OF KINEPOLIS GROUP NV

IN ’000 € 2015 2016

Non-current assets 349 766 377 933

Intangible assets 1 227 4 995

Property, plant and equipment 9 973 7 419

Financial fixed assets 338 566 365 519

Current assets 39 845 35 771

TOTAL ASSETS 389 611 413 704

Equity 67 372 69 117

Issued capital 18 952 18 952

Share premium 1 154 1 154

Legal reserve 1 895 1 895

Unavailable reserves 3 238 2 526

Available reserves 7 050 7 050

Profit carried forward 35 083 37 538

Provisions and deferred taxes 9 355 3 088

Non-current loans and borrowings 260 669 287 831

Current loans and borrowings 38 050 39 948

Accrued charges and deferred income 14 165 13 720

TOTAL EQUITY AND LIABILITIES 389 611 413 704


CONDENSED UNCONSOLIDATED BALANCE SHEET OF KINEPOLIS GROUP NV

PROFIT APPROPRIATION OF KINEPOLIS GROUP NV

IN ’000 € 2015 2016

Operating income 85 604 86 090

Operating expenses 36 183 38 947

OPERATING PROFIT 49 420 47 143

Financial result -7 244 -9 021

Current tax expenses -20 263 -12 685

GAIN/(LOSS) FROM THE FINANCIAL YEAR FOR APPROPRIATION 21 913 25 437

IN ’000 € 2015 2016

Gain/(loss) from the fiscal year for appropriation 21 913 25 437

Profit carrying forward from previous financial year 28 529 35 083

Transfer from equity: -6 125 -711

- to the legal reserves -6 125 -711

Profit to be carried forward 35 083 37 538

Dividend 21 484 23 693

MANDATES AND REMUNERATION OF THE STATUTORY AUDITOR OF KINEPOLIS GROUP NV

IN ’000 € 2015 2016

Remuneration for the statutory auditor for the performance of a mandate as statutory auditor 167 165

Other audit-related services 6 49

Tax services

Other 20 7Remuneration for other services or assignments performed within the Company by the statutory auditor 26 56

Other audit-related services

Tax services 60 33

OtherRemuneration for other services or assignments performed within the Company by persons associated to the statutory auditor 60 33

TOTAL 253 254


Glossary

Gross profitRevenue – Cost of sales

Operating profit (EBIT)Gross profit – marketing and selling expenses – administrative expenses + other operating income – other operating expenses

Current operating profit (REBIT)Operating profit after eliminating non-current transactions

EBITDAOperating profit + depreciations + amortizations + impairments + movements in provisions

REBITDAEBITDA after elimination of non-current transactions

Effective tax rateIncome tax expense / profit before tax

Current profitProfit for the period after elimination of non-current transactions

Profit for the period, share of the GroupProfit attributable to equity holders of the Company

Basic earnings per shareProfit for the period, share of the Group / (average number of outstanding shares – average number of treasury shares)

Diluted earnings per shareProfit for the period, share of the Group / (average of number of outstanding shares – average number of treasury shares + number of possible new shares that must be issued under the existing share option plans x dilution effect of the share option plans)

Capital expenditureCapitalized investments in intangible assets, property, plant and equipment and investment property

Net financial debtFinancial debt after deduction of cash and cash equivalents and tax shelter investments

ROCE (Return on capital employed)REBIT / (average non-current assets – average deferred tax assets + average assets held for sale + average trade receivables + average inventory – average trade payables)

Current RatioCurrent assets / current liabilities

Free cash flowCash flow from operating activities – maintenance capital expenditures for intangible assets, property, plant and equipment and investment property – interest paid


Financial calendar 2017-2018

Wednesday

May 2017

PUBLICATION BUSINESS UPDATE

Q1 2017

Thursday

August 2017

PUBLICATION H1 2017 RESULTSPRESENTATION

TO PRESS AND ANALYSTS

Wednesday

May 2017

GENERAL MEETING

KINEPOLIS GROUP NV

Thursday

November 2017

PUBLICATION BUSINESS UPDATE

Q3 2017

Tuesday

May 2017

DIVIDEND PAYMENT

Thursday

February 2018

PUBLICATION 2017 ANNUAL RESULTS

PRESENTATION TO PRESS AND ANALYSTS

These dates are subject to change.

For updates of the financial calendar, please refer to the Kinepolis Investor Relations website at www.kinepolis.com/corporate.


Registered office: Kinepolis Group NVEeuwfeestlaan 201020 Brussels, Belgium

Correspondence address: Kinepolis Group NVMoutstraat 132-146B-9000 Ghent, [email protected] BE 0415.928.179 BRUSSELS RPR

Investor Relations: Nicolas De Clercq, CFO Tine Duyck, Executive Assistant CFO & IR Coordinator [email protected]

Investor Relations website: www.kinepolis.com/corporate

Creation: www.linknv.be

This report is printed in English and Dutch. A version in French is also available online.

128

www.kinepolis.com/corporate Registered offi ce: Kinepolis Group NVEeuwfeestlaan 201020 Brussels, Belgium

Annual report

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KINEPOLIS...Word from the Chairman and CEOs Ladies and Gentlemen, Dear shareholder, customer and employee, 2016 was an exceptional year of expansion for Kinepolis, with the opening